- GlobalData forecasts real GDP to rise by 2.9% in 2022 and 2.5% in 2023.
- Germany was ranked 10th out of 136 nations in the GCRI Q4 2021.
- According to GlobalData, the construction sector is forecast to grow by 5.5% in 2022 and at an annual average growth rate of 6.1% during 2023–2024.
PESTLE Summary
- Political: Impact of Russia-Ukraine crisis on Germany. The unannounced war between Russia and Ukraine has an impact on the world politics, economy, and global markets. In February 2022, Germany announced to close airspace to Russian aircrafts. In March 2022, Chancellor of Germany announced to provide $113 billion for the German army during an emergency parliamentary session on Ukraine conflict. According to the Trade Statistics for international business development, 1.5% of Germany’s total import from Russia and 0.2% from Ukraine in 2020. Although trade dependency on both the nations is marginal, deep historical economic and cultural links with Russia may impact Germany.
- Economic: Germany economy to continue its positive growth path in 2022. According to GlobalData, the real GDP contracted by 4.6% in 2020. Strict lockdown restrictions disrupted trade, and poor consumer confidence resulted in an overall decline in consumption expenditure in 2020. However, the real GDP growth rate of Germany expanded by 2.9% in 2021, according to GlobalData estimates. The real GDP is further forecast to rise by 2.9% in 2022 and 2.5% in 2023. The unemployment rate is forecast to decline to 4% in 2022, from 4.3% and 4.6% in 2021 and 2020, respectively, due to the resumption of economic activities and easing of lockdown measures.
- Social: Strong performer on the UN's Human Development Index. Germany has performed well on various social parameters because of its socialist policies. According to UNDP, Human Development Index (2020), Germany was ranked sixth out of 189 countries in 2019. According to the report, mean years of schooling was 14.2 years in 2019, highest among developed countries in the index. Moreover, life expectancy at birth was around 81.3 years in 2019, one of the highest in the world. This is indicative of good education and healthcare standards in the country.
- Technology: Growing ICT sector. In 2021, Vodafone Germany entered a partnership with Ericsson, Nokia, Qualcomm and OPPO, and launched 5G Standalone (SA) network in the country. These companies proclaimed the entire 5G network would rely on Standalone architecture by 2023. According to the Federal Network Agency, more than 53% of German territory is covered by at least one provider supplying 5G services as of October 2021. In November 2021, the Telco company announced to provide 5G network to 60 million people in Germany by 2023. According to the Network Readiness Index (2021), the country secured first rank among 130 economies for technicians and associate professionals, and E-commerce legislation. The robust ICT sector of the country is expected to support ICT and encourage innovation and development in Germany.
- Legal: Immigration law. In December 2021, the country announced to introduce an immigration law, due to lack of skilled employees in Germany. At present, many firms are unable to fill vacancies with skilled workers. The regulation aims to provide opportunities card with points system for job seekers to enter Germany. The law would make the process easy for foreign educational and vocational qualifications to gain recognition in Germany. Moreover, the country anticipates to expand the scope of Blue Card in national law to meet the requirements of non-graduates in Germany. The Federal Government also announced a plan for family reunification to all refugees.
- Environmental: Step towards renewable energy. The country is gradually phasing out its use of fossil fuels in the electricity sector in order to reduce the use of emissions. In October 2021, the German Federal Maritime and Hydrographic Agency (BSH) approved 900MW Borkum Riffgrund three offshore wind farm projects in the German waters of the North Sea; expected to get operational by 2025. In February 2022, the country launched a tender for a new site in the North Sea, seeking to award 980MW of offshore wind capacity. According to the BSH, wind turbines would be commissioned by 2027. The project aims to boost offshore wind capacity to at least 30GW at end of the decade and to more than 70 GW by 2045. On Jan 2, 2021, Germany’s Renewable Energy Act came into effect, which is responsible for the significant growth in onshore wind, solar PV, and biogas.
Key Fundamentals
Macroeconomic Outlook
- According to the Federal Transport Infrastructure Plan 2030, the German government will be investing $147.6 billion during 2016–2030 into the country’s roads.
- In September 2021, Sinara Transport Machines Center of Innovation Development (STM CID) and Deutsche Bahn signed a memorandum of understanding (MoU). The MoU lays the foundation for two parties to develop and undertake joint testing of railway equipment, collaborate with rolling stock manufacturers and prepare joint applications for international projects.
- According to GlobalData, the nominal GDP increased from $3.8 trillion in 2020 to $4.2 trillion in 2021 and is further forecast to increase to $4.5 trillion in 2022. The country stood at fourth rank among 219 economies.
- The unemployment rate has been exhibiting a downward trend since March 2021. It declined to 3.1% in January 2022 from 3.7% in March 2021. Reopening initiates have restored number of jobs lost due to COVID-19 restrictions. With gradual easing of restrictions and reopening of the economy, Germany has been exhibiting signs of recovery.
GlobalData Country Risk Index (GCRI) - Q4 2021
Germany was ranked 22nd out of 190 countries in World Bank’s Doing Business 2020 report. In the World Bank’s Doing Business 2020 report, Germany was ranked 22nd out of 190 economies, with a score of 79.7. It takes eight days to start a business in Germany, lower than the OECD high income average of 9.2 days. The cost of starting a business is 29.8% income per capita, whereas the OECD high income average is 7.6%. Germany was ranked fifth in getting electricity (28 days as compared to the OECD high income average of 74.8 days). Germany was ranked fourth in resolving insolvency, with an average time of 1.2 years.
GCRI Methodology
GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies on the basis of historical developments in an economy and future expectations.
The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources and incorporates proprietary data from GlobalData. Western European countries in this publication include Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, the Netherlands, Norway, Portugal, Ireland, Spain, Sweden, the UK, Luxembourg, Iceland, and Switzerland.
About the report
GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.
More details: Germany PESTLE Insights – A Macroeconomic Outlook Report