Germany: Economy grows in 2012 despite Euro area crisis
January 15, 2013
According to a preliminary estimate from the Federal Statistics Institute (Destatis), GDP grew 0.7% in 2012, which marked a notable deceleration compared to the 3.0% expansion recorded in 2011. The reading fell short of both market expectations and the government's estimate, which had the economy growing 0.8%. The preliminary figure is still subject to revision and more detailed data for 2012, including Q4 results, will be published on 14 February.
The economy stood firm in 2012 as a result of a healthy external sector in spite of the adverse international environment. Exports of goods and services increased 4.1% in 2012, a slowdown over the 7.8% expansion observed in 2011. Imports grew 2.3%, which marked a deceleration compared to the 7.4% increase observed in 2011. As imports decelerated more than exports, the net contribution from the external sector to overall economic growth increased from 0.6 percentage points in 2011 to 1.1 percentage points in 2012.
Domestic demand, on the other hand, deteriorated compared to 2011. Private consumption decelerated to a 0.8% expansion in 2012 (2011: +1.7%), whereas government spending maintained the pace seen in 2011, and increased 1.0%. In contrast, fixed investment contracted 2.1% in 2012, which contrasted the 6.2% expansion observed in 2011.
The government revised its growth forecast for this year, pointing to slower growth. Accordingly, the government now sees the economy growing 0.4%, which is below its previous 1.0% estimate. For 2014, the government expects economic activity to increase 1.6%. Meanwhile, in its December economic outlook, the Bundesbank significantly cut its growth projections for 2013 and now expects the economy to grow 0.4%, well below its previous 1.6% estimate. For 2014, the Bank sees the economy growing 1.9%, if "the euro-area banking and sovereign debt crisis does not escalate further".
Author: Ricardo Aceves, Senior Economist