Example research essay topic: Gdp Real Growth Goods And Services - 2,517 words

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Germany is the world's third most economically advanced country after the US and Japan, though it took a lot of various recourses to balance the economy of the East and the West after unification. Recently its inflation rate is one of the lowest in Europe and GDP growth is stable. The main problem is high unemployment. German economy is heavily export-oriented, with exports of over one-third of national output. Germany tries to encourage overseas investors. Corporate restructuring and growing capital markets are transforming German economy to meet the challenges of European economic integration and globalization in general.

The raising maturity of German market is characterized by its increasing professionalism and enhancing internationalization, both in terms of demand and supply. After the World War II, there was a long period of outstanding economic achievements, and this made Germany the third largest economy in the world, after the US and Japan. Clear and fair fiscal policy, excellent cooperation between social partners, outside support in the form of Marshall Aid played an important role for successful recovering of the country. The main feature of the economic system was its course to a "social market economy": this required the system be ruled by market forces, but the government still controlled distribution of the resources in favor of the weakest branches of the market and supported the under-privileged. Social market concept advantaged to concordant labor relations.

One more element of the German economic model taking source from those times and still characteristically benefiting in modern economy was the focus on financing and banking, which allowed the market players to concentrate on long-term goals and protected them from short-term frustrations with basic economical indicators. But debates about the advantages of German economic model increased during the second half of the 1990 s, in the situation of growing international rivalry and a breakaway from producing of traditional goods to high-value added services with the result of unbalance at the labor market. Unemployment continued to set post-war monthly records through the end of 1997 and averaged 4. 3 million for the year. Moreover, the integration of the country into European financial markets has started a diversion from the reliance on long-term bank financing and growing attention to direct financing on capital markets.

This has led to a stronger focus of companies on shareholder value. In 1999 the government commenced the means directed onto lowering of the fiscal deficit. These efforts have been complicated by increasing unemployment, imperfections in tax policy and the continuing reassign of about $ 100 billion a year to eastern Germany to overtake the arrears caused by communist economical confusion. Therefore, the West played incomparably more important role in economical achievements of the country, which are still being called as the 'Wirtschaftswunder' (economic miracle).

The Western economy is principally industrial, with large chemical and automobile manufacturing plants, mechanical, electrical and electronic engineering, with rapidly improving advanced technology and service segments in computing, biotechnology, information processing and media. For many years after the reunification the Eastern economy was far behind. Nevertheless, after a large amount of pessimistic predicating and overcoming of initial difficulties, the Eastern economy has been successfully absorbed into the Western. The reputation of Germany at international market has for long been associating with the feature of "stability." This is one of important factors attracting potential customers and investors to the country. The variety of commercial opportunities is provided by diversity of Germany's business and economic community: from large modern enterprises and corporations whose names and trade marks are known throughout the world to small-sized companies whose business is directed towards profitable operating at their highly-specific segments. During 1990 s, Germany achieved annual average real growth of no more than about 1. 5 % and persistently high level of unemployment.

After unification the best GDP real growth index was reached in 2000, when it raised up to 3. 0 %, mostly because of enhancement of global demand; specialists expect that recently established business and income tax reductions will keep the growth rising in further years. Economic revitalization in the East has been at the expense of prosperous construction industries, with the growth progressively supported by the service segments and consumer manufacturing industry. Only the western part of the country, which contributes about 90 % of total GDP and has three times the per capita income of eastern Germany, is currently the world second largest exporter, after the USA. German GDP is estimated to be about one third of GDP of the whole Europe.

Table 1. Main Economical Indexes of German Market. Source: Germany Statistical Office. 1999 2000 2001 2002 GDP per head ($ at PPP) 24, 660 25, 898 26, 680 27, 060 GDP (% real growth pa) 2. 05 2. 96 0. 57 0. 18 Government consumption (% of GDP) 19. 15 19. 08 19. 00 19. 11 Budget balance (% of GDP) - 1. 50 1. 12 - 2. 78 - 3. 60 Consumer prices (% change pa; av) 0. 52 1. 33 1. 98 1. 35 Public debt (% of GDP) 61. 18 60. 50 60. 21 61. 30 Labor costs per hour (USD) 25. 66 22. 99 22. 86 24. 89 Recorded unemployment (%) 10. 51 9. 62 9. 38 9. 29 Current-account balance/GDP - 0. 90 - 1. 09 0. 13 2. 50 Foreign-exchange reserves (bn$) 61 56 51 51 As we can see from the data, in recent years the average GDP growth slowed down a lot and has been surprisingly one of the lowest in Europe. The rate of inflation rose to 2 % in 2001 and decreased down to 1. 3 % in 2002, this rate is incomparably better than those of the most of EU countries. But unemployment rate remains the main difficulty of German economy.

Fortunately, it has a tendency to decrease in the last two years from 9. 6 % in 2000 to abut 9. 25 in 2003, despite of pessimistic forecasting. Even though economical indexes of the East and the West parts of the country are sometimes rather diverse, nevertheless Germany has made great progress in raising the standard of living in eastern Germany, having introduced a market economy and improved its infrastructure. Eastern economic growth rates have been considerably lower than in the west in recent years, unemployment is almost two times as high, which caused the outflow of qualified labor forces to the west, thats why efficiency and productivity of manufacturing is still far behind. Eastern consumption levels are dependent on public financial transfers from west to east totaling annual about $ 65 billion, or more than 4 % of the GDP of western Germany.

The government, in addition to social assistance expenditures, approved a policy of increasing of funds to support the development of eastern economy Germany is among the world's largest and most technologically advanced producers of iron, steel, coal and cement, chemicals, tools and machinery, vehicles, electronics, food and beverages; shipbuilding; textiles. During the last years all the main sectors of industry have profited, especially the manufacturers of consumer goods. For 2003 in whole, a little growth in value added over the previous periods was achieved in most of commercial segments (manufacturing + 0. 2 %, services + 0. 5 %). Both in the industrial sector and in the consumer service sector, value added was increasing in the first half of 2003. Since the beginning of the year the external orders in producing have been growing noticeably, both for domestic and international markets. The domestic market of the country is weak and can be characterized by anemic private consumption, it is unclear will this market increase or decrease, resulting in a dependency of the production industry on exports.

Although forecasts predict that exports volumes will grow, the high level of the EURO might be an obstacle for exporting goods. The united German economy occupies dominant positions in world markets because of its strong export orientation. Now it is the world's second largest exporter. The main industrial export is from West Germany that has a highly developed manufacturing particularly in the aircraft and automobile sectors, the chemicals, electronics, computerization and advanced technology.

In recent years, 58. 3 % of the exports went to the EU countries, headed by France (11. 4 %) and Britain (7. 8 %). The United States is the second biggest trading partner of Germany, and the USA-German trade continues to grow strongly. Two-way trade in goods and services totaled $ 94 billion in 2002 that amounted to 10. 3 % of total exports of Germany. The main imports for 2001 - 2002 were from the European Union (53. 1 %), again headed by France (9. 6 %), Holland (8. 8 %), Italy (8. 1 %), UK (6. 0 %). Imports from the United States took 8. 5 % of total imports.

The US exports to Germany totaled $ 30. 1 billion while the US imports from Germany were twice as high, $ 59. 2 billion. Major US export categories include electrical and telecommunications equipment, data processing tools, motor vehicles and parts. EU expansion will open for German commercial companies new prospects for trade. Besides, it is expected to create new opportunities for them to increase the effectiveness of producing of goods and services, the researchers say. However, German firms will have to invest more recourses in research and development if they want to be successful among the competitors to the east, where labor costs less. German regional trade is concentrated in Poland, Hungary and the Czech Republic, which together takes about three-quarters of the total.

Direct investments in manufacturing facilities have also risen radically, that underlines the increasing importance of economic relations between Germany and its neighbors to the east. German agriculture is not as developed as industry; it brings rather small part of the GDP and is financially supported by the EU's Common Agricultural Policy and German government itself. The leading power in the German economy is the banking system. The central bank, the Bundesbank, is comprehensively devoted to maintaining the value of the nation's currency, even at some potential cost to economic growth.

It controls inflation rates and is determined to prevent the recurrence of Germany's disastrous Great Inflation of 1920 s. System of private banks is large and spread. German industrial and commercial companies rely and trust in bank finance much more than in own shares. The banks provide financial services and this way can supervise the activity of the majority of corporations.

From that position, they guarantee the traditional banking profits with slow but stable and safe growth. Germany has a liberal foreign investment policy. Nowadays specialists are concerned about the slump in importance of Germany as an investment target, despite of developed economical and technological infrastructure and skilled labor force. They refer to growing tendency of German businessmen to place new producing capacities abroad, in Europe and the USA to keep away from Germany's high taxes, inflexible labor systems and extensive regulations, to be closer to foreign markets.

For similar reasons foreign investment in Germany has been decreasing in recent years. From 1997 to 2000, annual average of the USA direct investment in Germany reached $ 3. 4 billion, while those of German investors in the USA totaled $ 22. 2 billion. But at the same time, 100 % foreign ownership is recognized in the majority of sectors and there is no discrimination to overseas investors in favor of national ones. There is no difference in benefits also; they are commonly given in the form of investment grants, tax benefits or low interest loans. The interest rate is 5 % - 10 % of the investment (for small and large companies), in East Germany it raises up to 28 - 35 %. If low interest loans are granted, the amount of the investment grant is reduced.

National investment funds are controlled by laws, which secure investors capitals and guarantee protection, and they can only lend not more than 10 % of total resources to any particular enterprise. Not only investments are supporting the industries, the federal government does it to a massive degree. Overall, the federal government provides about one-third of total subsidies, the other two-thirds came from the Lander and the localities. During the late 1990 s, the total volume of subsidies has averaged around 7. 56 percent of German GDP, although it has risen because of unification. Frequently discussions appear about the effectiveness of federal subsidies, German economists used to suppose that government supports potentially not profitable sectors, but the fact is that some industries, especially coal and steel production, are globally dependent on subsidies. The government's share of spending still remained lower than that index of other leading European states, in the beginning of the decade it averaged around $ 1 trillion, including capital expenditures of $NA...

But the spending level still remains higher than that of two main competitors, the United States, at about 35 %, and Japan, at about 33 %. The German governmental spending has risen well because of the costs recovering and reorganization after unification, and there is little probability that it may noticeably lower in some coming years. The cumulative public-sector debt of various levels of German government has grown during the early 1990 s, that figure had risen by several 100 billion Deutsche Marks and was estimated to be almost DM 1. 5 trillion, or 50 % of united German GDP. It reached its peak of over 60 % of GDP by 1997 - 1999 and then began to fall down slowly.

Interest payments on the public debt have become the second largest single line item in the German budget, engaging 14 % of the budget. The German culture of cooperation also extends to the relations between the private sector and the government. The social market economy, in which all elements of the system cooperate, stresses the importance of having all parties to the social contract work together. Despite of structural mis balance in the labor market and extensive government regulation, German economy is flourishing and internationally competitive. Although production costs are high, the country is still an excellent powerhouse. Besides, Germany is strategically located to take advantage of the rapidly developing central European countries.

The current administration directs its efforts to solve some of the country's structural problems, with important tax, social security, and financial sector reforms. REFERENCES 1. AllRefer Reference Germany. The Domestic Economy. Information Courtesy: The Library of Congress - Country Studies. Online source.

Available: web 2. CIA World Factbook 2003, U. S. Dept. of State Country Background Notes (Source Date: 05 / 02) 3. NCBuy: Germany Economy Country Reference, profile data.

Online source, available: web 4. Persian, Gert (Ghent University) Monetary Policy and Long Term Interest Rate in Germany Online publication. Available: web 5. Timothy W.

Guinnane Population and the Economy in Germany, 1800 - 1990 (1998) Yale University, Economic Growth Senter, p. 77

Research essay sample on Gdp Real Growth Goods And Services