Europe's largest and the world's third largest economy is showing mixed signs as various reports indicate that its economy is set to lose its growth momentum in 2008. Germany has benefitted hugely from the formation of European Union (EU), which has emerged as its largest foreign trading partner as well as the most important investor. A slowdown in its economy could spell doom for its neighbors also, as Germany accounts for nearly 35% of the region's economic output. Hence, the economic performance of Germany is very important to the fortunes of the entire European region as well.
According to OECD Economic Outlook, the German economy which grew by a solid 3.1% in 2006, grew only 2.6% in 2007, and is forecasted to settle at 1.8% in 2008. If Germany continues to touch new lows in terms of GDP, China will very soon replace it as the world's third largest economy, according to a report by IMF. It says, "A slowing US economy and weaker world trade are pulling down [Germany's] GDP growth, given Germany's strong external dependence." The crisis in the US real estate market has assumed gigantic proportions and is impacting many countries, including Germany. Moreover, the US dollar is continuously declining against the euro, thus causing the oil and food prices to rise, which has an adverse effect on the consumers. |
