Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Germany is the top economic power in Europe and the fourth globally. After experiencing a historic recession following the COVID-19 pandemic, the country’s economy grew throughout the first three quarters of 2022 driven by an ongoing recovery in private consumption. However, Germany only grew an estimated 1.5% in 2022, slower than one year earlier (2.6% - IMF) due to the consequences of the Russia-Ukraine conflict: prior to the invasion, Germany was highly dependent on Russian gas, oil and coal, with around one-third of primary energy supply coming from Russia. The political situation and the resulting EU sanctions against Russia forced Germany to reduce such dependency; however, there were severe disruptions in the supply chain (especially in the chemicals and automotive sectors, which together account for almost 6.5% of GDP) and in energy imports. Sentiment indicators have deteriorated markedly towards the end of 2022; with a decrease in private consumption due to high inflation and rising energy costs. The IMF expects GDP to decrease by 0.3% in 2023 (-0.6% according to the EU Commission), before rebounding by 1.5% in 2024. Downside risks to the forecast remain, especially those related to delays in the energy supplies diversification, which may cause shortages and spur inflation in the winter of 2023-24.

The unprecedented measures taken to fight the pandemic and stabilise the economy – focused on subsidies to companies, prolongation of the short-time work scheme and increased healthcare spending for vaccination and testing - drove an increase in Germany’s budget deficit in recent years. Pandemic-related support programmes were phased out by mid-2022, but three energy support packages estimated at EUR 95 billion in direct expenditures and an energy support fund of 5.5% of GDP financed by credit allowances contributed to the third consecutive year of fiscal deficit (-3% as per the IMF), despite higher tax receipts. While the IMF expects the deficit to decline to 1.8% this year and 1.1% in 2024, the European Commission forecast is less optimistic (3.1% and 2.6%). After peaking at 71.1% in 2022, the government debt-to-GDP ratio is projected to decrease to 68.3% in 2023 and 65.6% the following year (IMF) thanks to the growth of nominal GDP on the back of high inflation, the reduction in the portfolio of bad banks and the decline of cash reserves. Inflation reached a record level of 8.5% in 2022 driven by the aforementioned surge in energy prices, rising input costs and a boost to service sector wages. A tighter labour market and the staggering pass-through of wholesale energy prices should contribute to a gradual decline in inflation, projected at 7.2% this year and 3.5% the next (IMF). For 2023, export growth is expected to recover due to easing supply chain bottlenecks and a record-high order backlog.

Unemployment was estimated at 2.9% in 2022 (IMF), down from 3.6% one year earlier, with wage growth averaging 5% on an annual basis in the first half of the year. The IMF forecasts an increase in unemployment to 3.4% this year and 3.3% in 2024. With a GDP per capita (PPP) of USD 57,927, Germany is among the wealthiest countries in the world (World Bank). Nevertheless, according to data by Destatis, around 20.7% of the country's population is at risk of poverty or social exclusion (latest data available).

Foreign Trade

Trade represents 89% of Germany’s GDP (World Bank 2021, up from 81% one year earlier), and the country is both the world’s third-largest importer and exporter. The country is by far the world’s largest exporter of automobiles (with a value of EUR 117.6 in 2021 - Destatis).  In 2021, the four largest groups of exported goods made up almost half of the country’s exports: vehicles and vehicle parts (15.3%), machinery (14.2%), chemical products (10%) and computer/electrical and optical equipment (8.8%). The main imported goods were computer/electrical and optical equipment (10.7%), vehicles and vehicle parts (9.5%), chemical products (7.8%), machinery (7.6%), electrical equipment (6.9%) and metals (6.4% - BMWi).

In 2021, Germany’s primary trade partner was the European Union which accounted for 67.5% of exports and 65.6% of imports (BMWi). Accounting for 8.9% of German exports, the U.S. remained Germany’s most important export market in 2021, followed closely by China (7.6%), France (7.4%) and the Netherlands (6.6%). Imports came chiefly from China (11.9%), ahead of the Netherlands and the U.S. (7.6% and 6.1%, respectively). Germany continues to be the “most open” economy of the G7 countries.

The country’s trade balance is structurally positive: according to the latest figures from the national statistical office Destatis, Germany’s surplus on the trade of goods declined for the fifth consecutive year, falling to EUR172.5 billion (was EUR 180.4 billion in 2020); 62.9% of the overall trade surplus was with the EU-27, with the eurozone accounting for a share of 46.5%. In regards to Germany’s vast trade surplus, since 2014 the European Commission has encouraged the country to favour internal demand dynamics instead of exports, in order to mitigate the existing “macroeconomic imbalance” in the EU (as per the Commission rules, EU countries should not have an external trade surplus of more than 6% of their GDP). Data from the Federal Ministry for Economic Affairs shows that in 2021 the country exported goods worth USD 1.370 billion (an increase of 15.2% year-on-year), importing a total of USD 1.180 billion (+18%). Germany is generally a net importer of commercial services: in 2021, however, the country exported USD 319.7 billion worth of services, while imports were slightly lower, at USD 317.3 billion.
In 2022, the German export surplus was at its lowest level since 2000 as it went down by more than half to EUR 79.7 billion from EUR 175.3 billion one year earlier, mostly due to the steep rise in the cost of energy imports (Destatis).

COVID-19 Country Response

Travel restrictions

Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.

Import & export restrictions

A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

The summary of the EU’s economic response to the COVID-19 pandemic is available on the website of the European Council.
For the general overview of the key economic policy responses to the COVID-19 pandemic (fiscal, monetary and macroeconomic) in Germany, please consult the country's dedicated section in the IMF’s Policy Tracker platform.

Support plan for businesses

For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.