Germany Rides High on Export Boom

Though Germany's economy managed only a 1.7 percent growth rate last year, German companies took advantage of better-performing economies in other parts of the world to finish as world champions in the export market in 2004.

Traditionally a strong export nation, Germany last year set a new record for export statistics, with firms selling goods abroad to the tune of over € 730 billion ($954 billion). Imports made up € 575.4 billion of the trade balance, giving the country its largest surplus in history.

A surprise to some

The figures released by the Federal Statistical Office came as a surprise to many, as the strong Euro and the record-high oil price were thought to have a negative impact on Germany’s exports. But the head of the Association of German wholesale and foreign traders, Anton Börner, said German companies were clever enough to take precautionary measures well in advance.

The economic boom in the United States and particularly in China played a major role in Germany's export success in 2004. Chancellor Schröder has quickly come to realize the huge potential of German-Chinese trade relations and has made a point of regularly visiting China together with a big business delegation. While German exports to European Union member countries grew moderately, exports to nations outside the EU literally skyrocketed.

What about at home?

Traditional winners such as pharmaceuticals and heavy machinery showed the most improvement over last year, with nine percent more exported. The auto industry also made strides.

But Börner warned that the country's export success did not have a positive impact on domestic demand. His organization continued to criticize the government for not doing enough to promote Germany as an investment destination.

Employment remains stubbornly low

The vicious circle of low growth rates will never improve unless more is done to increase domestic demand, according to Börner. Government officials anticipate the 1.7 percent growth rate this year will repeat itself in 2005, according to a report in the Financial Times Deutschland.

The government’s assessment appears to be in stark contrast to the projections of most economic research institutes in the country which predict that growth will trickle down to a mere 1.4 percent at best. Economics Minister Wolfgang Clement, whose political fate hinges on the success of the government’s labor market reforms, is optimistic that growth rates can be upheld this year.

He admits, though, that a considerable reduction in unemployment figures can only be expected for the second half of this year. And many economic pundits argue that the reforms enacted so far will not lead to more employment.