Edited by Lawrence R. Klein
Chapter 5: Short-term Forecasting of Key Indicators of the German Economy
Andrei Roudoi ECONOMIC GROWTH 1. The German economy was the third largest in the world in 2006, behind those of the USA and Japan. In 2007, it is likely to be surpassed by China. German GDP, which reached 2.3 billion euros in 2006, was larger than GDP in any other economy that is now in the European Union (EU), accounting for 20.1 percent of total EU GDP.1 This high share is a result of both the advanced development of the German economy and the large size of the German population, which in 2006 stood at 82.4 million, or 16.1 percent of the total population in the EU-27. Germany contributes significantly more to EU GDP than the share of its population in the EU population. This is a sign of the high productivity of the German economy. However, it also reflects the fact that many EU countries are transition economies, still catching up with more advanced West European countries. While Germany’s per capita GDP is relatively high by EU-27 standards, it is not that impressive when compared with per capita GDP in other West European countries. In these terms, Germany ranks only eleventh in the EU-27, lagging behind most countries in the more advanced EU-15 (see Table 5.1). Germany’s ranking improves by just one notch if per capita GDP is measured in purchasing power parity (PPP) terms. The economy of the Federal Republic of Germany (FRG, or West Germany) grew at a moderate pace during the decade prior to the country’s...
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