Booming global demand for German-made goods enabled the German economy, the biggest in the euro zone, to notch up modest growth last year, even if domestic demand remained disconcertingly fragile.
German gross domestic product (GDP) expanded by 0.9% in real or price-adjusted terms in 2005, the federal statistics office Destatis calculated in preliminary figures. That was slower than the growth of 1.6% recorded in 2004.
But there were two more working days in 2004 than in 2005 and adjusted for such calendar effects, growth in both years stood at 1.1%, the statisticians said.
As in previous years, German growth in 2005 was driven almost exclusively by booming foreign trade, the office said. Exports jumped by 6.2% in 2005 and import growth was almost as high at 5%. 'The resulting net export surplus accounted for 0.7 percentage points of growth,' Destatis said.
Domestic demand, on other hand, contributed only 0.2 percentage points to growth, with private consumption stagnating and state spending contracting by 0.4%. Gross capital formation contracted slightly by 0.3%, with investment in plant and equipment expanding by 4%, while construction investment was down by 3.6%.
Germany ran up a public deficit of €78 billion in 2005, equivalent to 3.5% of GDP. Under the terms of the Stability and Growth Pact, euro zone member states are not allowed to run up deficits in excess of 3% of GDP. But Germany has now breached that limit for four years in a row.
The German deficit ratio shot up to 3.8% in 2002 and then to 4.1% in 2003, but then declined somewhat to 3.7% in 2004.
The government, in a statement in Berlin, hailed the robustness of German exports, saying it was proof of the competitiveness of German companies. And as corporate profits improved, companies would step up investment, meaning the spark of strong export growth could soon jump over to the domestic economy, Economy Minister Michael Glos said.
Economic experts are predicting the economic recovery in Germany to gather momentum sharply this year, with leading think-tanks such as Ifo expecting growth to accelerate to as much as 2%. The government is scheduled to publish its revised economic forecasts on January 25.
Berlin is currently pencilling in growth of 1.2% for the current year, but that projection is likely to be revised upwards substantially, possibly to 1.8%, minister Glos recently suggested.