Germany's Economy for the Past Years - Statistics Project Example

ECONOMY OF GERMANY WITHIN THE PAST TWO YEARS Name: Course Instructor’s name Institution Date GERMANY’S ECONOMY FOR THE PAST TWO YEARS How Germany Government has been in running its economy over the last two years In the last quarter of the years 2015, the German economy was reported have grown by 0.3 %; this is rate was similar to that of the preceding year. Economists have therefore drawn their conclusions on the performance of the Germany economy for the past two years as a gradual small growth. This means that there is minimal expansion of the government and household investment and spending. On the other hand, this is an offset to a downward effect of foreign trade having that Germany spends mostly on locally manufactured goods and services (Bold and Svensson, 2013). This paper, therefore, highlight on Germany economic performance over the past two years. Germany GDP for the years 2015 was claimed to be expanding by 2.1 % margin from the earlier 1.8 % expansion in the year 2014. This is a record high being the fastest growth rate since the first quarter of 2012. Germany GDP growth rate is claimed to be an average 0.32 % from the year 1991 to 2015, with the year 2010 hitting a record high of 2 %. This was a drastic shift considering that in the previous year the county’s record low of -4.50 % was reviewed by the Federal Statistical Office in the first quarter of the year 2009 (Cesaratto and Stirati, 2010). Germany is claimed to be one of the largest economies in Europe and the fifth largest globally. Being reported to be the second-largest exporter in the world; Germany exports to the extent of a third of the total national output. Therefore exports are one of the country’s economic foundations that ensure the country’s economy is either constant or improving. In a recent statistics of Germany GDP in reference to the country’s expenditure reveals that the country’s household consumption is 55 %, gross capital 20 %; where 10 % is catered for by the construction industry,4 % on other products and 6 % in machinery production. The government’s expenditures caters for 19 % while the imports and exports were taking up a 39 % and 46 % respectively of the total country’s GDP (Cournède, Garda and Ziemann, 2015). Judging by this short-term forecast of the country’s economic performance we can claim that Germany economy has been recording a gradual minimal increase and a stagnating GDP performance. Quarter-on-quarter outlook on the country’s economic performance is revealed more accurately. In the last quarter of the year 2014 to the last one in the year 2015, the country’s private consumption sectors grew by 0.3%. This is slight fall comparing that the previous year they recorded a 0.6 % growth. The public consumption recorded a significant rise of 1.0 %, following the previous 0.5 % growth in September in the previous year (Ma and McCauley, 2014). The overall in eight quarters between the years 2014 to 2015 was a 0.3 percentage growth. The country’s Gross fixed capital formation increased by 1.5 % in the year 2015 from the 0.1 % recorded in the previous year. The Germany construction industry rose significantly in the year 2015 where it recorded a record high 2.2 % as the country’s imports recorded a 0.5 % rise. This brought a downward effect on the country’s overall GDP whereas the country’s inventories recorded a slight 0.1% increment (O'Sullivan, n.d.). In order to ensure such a remarkable constant performance in the country’s economy Germany's government has addressed the main issue which was termed as the major cause of the country’s economic crisis was high unemployment rate in the year 2000. From 1970 to late 19 century the county’s unemployment problem was the envy of every economy globally. With the other countries including the United States struggling to handle the high unemployment problem that was getting out of hand whereas the economy of Germany seemed to be the opposite. Its unemployment rate was a mere 2.5 % while that of other countries reaching up to 11 % (Pestel, 2014). However, over time, the county took up some absurd cyclical reforms which were a huge blow to the country’s low unemployment rate. These reforms included scraping of the unemployment insurance and strengthening experience rating in the employment sector. This led to more young individuals being overlooked when it came to employment. Another reform that instigated the high unemployment rate was age flexibility which gives the labour union less power than they should have. This limited the potential benefits unions can provide for the unemployed individuals in the country. In line with this firms and companies are more likely to enforce layoffs due to the minimal or no repercussion they might get due to their actions. With the country nearing to a financial crisis brought about by poor policies and their execution in relation to its economy Germany took up the effort to improve its economic performance from the year 2002 (Wittmann and Yildiz, 2013). Judging by a short-term overlook of the country’s economic performance in the past two years one can rightfully claim that there is some success achieved by the country’s new reforms. Some of the significant reforms taken up by the country which have contributed to the improved economic performance include; implementation of unemployment insurance that had earlier been scraped off, the country releasing the hold on experience in the employment sector and empowering labour unions in their course of ensuring that employees rights are observed. The governance of the country has ensured that Germany economy continues to be resilient despite the global financial crisis which has been affecting most European countries. With the job cases rising daily in most European countries economies the Germany unemployment rate has hit a remarkable post-unification low. This is attributed to the country’s new reforms that focused on timely labour markets and removal of economic constraints. However with the emerging demographic, environmental and social challenges Germany has to stick with these reforms and even come up with new ones which will help steer the country past the current economic strains facing most European nations. The main macroeconomic policies used by the Government and Central Bank of Germany over the last two years The country should, therefore, strategies its goals towards social, economic and environmental aspirations. This includes an introduction of the minimum wage with consideration of the employment prospects and ensuring that the fiscal sustainability of pension income is improved. Over the years, macroeconomic policies have been essential in the global economy stabilization. Good macroeconomic policies are now more than ever important especially with the current fragility of economies of European countries. With Germany seemingly having restrained the difficulties faced by the rest of European economic one can claim that its macroeconomic policies are the reason behind its formidable economic constrained resistance and consisted excellent performance. The situations of these economies have been so bad that some countries have recorded a 100% sovereign debt on advanced countries in their economic GDP ( Bold, and Svensson, 2013). One of Germany macroeconomic policies that have kept the countries afloat with the current economic constraints in the Eurozone economies is its emphasis on retaining a surplus of substantial income for the company. It is estimated that the country has up to €206 billion in surplus to help finance the country’s projects in case of any financial constraints thus helping the country avoid any debts (Cesaratto, and Stirati, 2010). Which have proven to be detrimental to the country’s economy in the long-term future. This figure estimates to a 7. % of the country’s total gross domestic product meaning it can be able to finance itself for several years without needing to borrow from other countries (Wittmann and Yildiz, 2013). This has helped it leapfrogged China to become the current worlds’ largest surplus economy. This is a huge achievement the current the economy affecting the Eurozone economies. The other macroeconomic policies that have ensured the stability of the country’s economy is fiscal reforms which have influence growth of the country’s economy. Investment is a key driver of any country’s economic growth that Germany has embraced. Through implementing formidable tax policies have greatly influence c country’s private sector. With other economies like Ireland facing an investment surge after taking up poor policies like streamlining its corporate income tax structure (Cesaratto, and Stirati, 2010). Other economies have taken up the policies where they tax all capital income has jeopardized the country’s investment due to the reduction in savings that has been caused by these tax policies reducing the countries investing potential. On the other hand, Germany has also embraced capital income taxation which based on its current economic performance has provided a better stimulus its private investment. Germany has also implemented favourable tax incentives in an effort to attract investment which has boosted its economic growth especially the machinery manufacturing and production sector. These incentives have directly reduced the country’s cost of capital especially the investment tax credits which have significantly been reduced compared to the other Eurozone economies. On the other hand, the country has also implemented open-ended incentives such as tax holidays. This has proven to success with Germany being the highly investing economies globally. With the fall of economies of the Euro -zone countries being blamed on not taking up formidable tax policies which have affected their revenue collection sector further is a dent their ability to invest. The implementation of tax policies on public investment in the country’s infrastructure is also a microeconomic policy that has been taken up by Germany (Cournède, et al., 2015). Germany’s federal Government focused on setting clear economic policy in line with the macroeconomic reforms that boosted the country’s economic performance for the past two years. In this case, the country focused on speeding on the public sector; the country has put more effort in investing in the education, energy efficiency, research, and infrastructure (Ma, and McCauley, 2014). This has paid off with the country’s energy sector evidently being able to cater for its growing industries. Through embracing environmental conservation, the country has also managed to use natural energy to steer its production and manufacturing sector. The country’s investment in education has benefited its labour market while the research was boosting in bettering it (O'Sullivan, M. (n.d.)). With many economies seemingly holding back on public investing Germany seems to make a bolder decision by not holding back on this issue. The other microeconomic policy taken up by Germany’s Government is the monetary policy where the Federal Reserve Board is directly influencing the country’s economy performance through manipulation of money supply. Financial ' deregulation has ensured that money usage by the country is well accounted for therefore allowing transparency and making a good investment decision. This has helped central bank plot the county’s monetary course through the proper use of funds. For instance, in the space of these two years, the country invested in $127 billion in foreign-owned assets. This decision was reached after a review of the country’s financial expenditure which showed that the country was spending quite a lot in these foreign owned assets (Wittmann, N. and Yildiz, 2013). The Federal Reserve Board influenced this decision by carrying out the review and how this action would be beneficial to the country’s long-term financial goals. This action has helped the country stimulate its dependency, therefore, limiting money supply chains from the foreign loans. Economists have claimed that the country economic performance can result in its action in limiting the foreign cash flows which would put it in in further debt (Pestel, 2014). Conclusion Germany being one of Europe’s largest economies it now has a new role in ensuring that the future of Europe and the world’s economy is as successful as the country. This will enforce it to help in policy stratification which will help many countries steer their economies past the current economic constraints that threaten to cause more crisis in the coming future. The country also being a manufacturing superpower its contribution in strategizing these global macroeconomic policies will boost the global manufacturing industry. References Bold, T. and Svensson, J. (2013). Policies and Institutions for Effective Service Delivery: The Need of a Microeconomic and Micropolitical Approach. Journal of African Economies, 22(suppl 2), pp.ii16-ii38. Cesaratto, S. and Stirati, A. (2010). Germany and the European and Global Crises. International Journal of Political Economy, 39(4), pp.56-86. Cournède, B., Garda, P. and Ziemann, V. (2015). Effects of economic policies on microeconomic volatility. OECD Journal: Economic Studies, 2015(1), pp.179-225. Ma, G. and McCauley, R. (2014). Global and Euro Imbalances: China and Germany. China & World Economy, 22(1), pp.1-29. O'Sullivan, M. (n.d.). The Political Economy of Corporate Governance in Germany. SSRN Electronic Journal. Pestel, N. (2014). Employment effects of green energy policies. IZA World of Labor. Wittmann, N. and Yildiz, Ö. (2013). A microeconomic analysis of decentralized small scale biomass based CHP plants—The case of Germany. Energy Policy, 63, pp.123-129. Read More