|
Originally published:
Jul-22-2004
Legal System
Based on the Grundgesetz (Basic Law) of 1949. Civil law system with indigenous concepts; judicial review of legislative acts in the Federal Constitutional Court; has not accepted compulsory ICJ (International Court of Justice) jurisdiction.
Economy
Currency: euro (EUR)
Inflation: 1.3% (2004 forecast), 1.1% (2003 est.), 1.3% (2002), 1.6% (2001), 1.5% (2000)
Real GDP Growth Rate: 1.4% (2004 forecast), -0.1% (2003 est.)
GDP Per Capita: $27,600 (2003 est.)
Leading Markets (2002): France (10.7%), US (10.3%), UK (8.4%), Italy (7.3%)
Leading Suppliers (2002): France (9.4%), Netherlands (8.2%), US (7.7%), Italy (6.4%)
Euro per US dollar: 0.8181 as of 7/21/04
Top Industries: iron, steel, coal, cement, chemicals, machinery, vehicles, machine tools, electronics, food and beverages, shipbuilding, textiles
General Economic Situation
Germany practices a social market economy that follows free-market principles. However, there is a large degree of government regulation and very generous social welfare protection. The economy, compared with other industrial nations, has an unprecedented international focus. Companies generate close to a third of their profits through exports, and almost one in four jobs are dependent on foreign trade. Although it is the fifth largest national economy in the world, and the largest European economy, it is also one of the slowest growing in the entire euro zone. Growth in 2001-2003 fell short of 1%. Although strong post-war economic growth has afforded its citizens one of the highest standards of living in the world, the economy faces serious issues including the persistent slow growth, high unemployment, high outstanding government debt with an increasing share of revenues going for debt service payments, high tax rates, high unit labor costs and, due to its aging population, growing social security and non-wage labor costs. IFO, an economic institute based in Munich, warns that "there are too many structural problems in Germany for it to be possible to participate in the world upswing."
Business Climate
Germany welcomes free world trade, opposes any form of protectionism, and is committed to further liberalization under the proviso of adherence to strict ecological and social standards with regard to sustainable development. The German market is an important component of any comprehensive European export strategy. The country has become an international marketing crossroad, allowing exporters to cover German, European and global prospects in one location due to the many world-class trade events that are held in the nation. Investors can count on high levels of productivity, a highly skilled labor force, quality engineering, a first-class infrastructure, and a location in the heart of Europe. The market has numerous attractive sectors as Germans appreciate innovation and advanced technology, particularly in consumer goods. New products in multi-media, high-tech and service areas that will help more Germans join the Internet generation offer great potential. Exporters should recognize, however, that the German market is as decentralized and diverse as the United States.
Germany presents few formal barriers to trade or investment, with the exception of the EU Common Agricultural Policy. German regulations, however, are complex and offer a degree of protection to established local suppliers. Companies interested in exporting to Germany should conduct thorough market research, identify relevant standards, and obtain timely testing and certification. For exporters looking to market across the European Union, satisfying German standards will likely prove beneficial as EU-wide standards are frequently based on German practice.
Credit and Collections
- Collection Experience: Good-Fair
- Exchange Delays: 2 months
- Preferred Credit Terms: 30 day Sight Draft
- Minimum Credit Terms: Open Account
Risk Assessment
While the German economy will benefit from the accession of Central and East European countries into the European Union, aging demographics continue to impede growth and jeopardize the social welfare system. However, the recent compromise reached by the government and the opposition should allow the pursuit of reforms intended to increase labor market flexibility and restore the financial integrity of the social security system. Industrial exports have remained competitive and contributed to substantial current account surpluses. Despite this, unemployment remains high and public finances have been running large structural deficits. The banking sector’s insufficient profitability and lack of implementation of Basle II insolvency criteria could increase the cost of credit especially for small and medium-sized companies.
Country Risk Rating: A2. Default probability is still weak even in the case when one country's political and economic environment or the payment record of companies is not as good as in A1-rated countries.
Sources for further information on doing business in Germany
The Federal Ministry of Economics and Technology: siite provides exhaustive information on Germany including a large section on Doing Business in Germany.
U.S. Commercial Service: has a large section on doing business in Germany including Economy and Business Practices, Business Infrastructure and other information.
*****
This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including Germany. For further information, contact info@abc-amega.com.
This report represents a compilation of information from a wide variety of reputable sources including: the U.S. Department of State, the U.S. Commercial Service, CIA World Factbook and Coface North America Country Risk Assessment.
Risk Assessment information: Coface.
Information on credit terms and the probability of prompt payment are provided, with permission, from Overseas Press and Consultants (OP&C) as published in IOMA's Report on "Managing Credit, Receivables & Collections," May 2004.
|
