Oecd Economic Surveys: Germany 1987-1988.

112 Pages·1988·5.88 MB·English

by  OECD

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OECD
ECONOMIC SURVEYS
GERMANY
ORGANISATION FORECONOMIC CO-OPERATION AND DEVELOPMENT
Pursuanttoarticle 1 oftheConventionsignedin Parison 14lh December,
1960.andwhichcameintoforceon30thSeptember, 1961,theOrganisation
for Economic Co-operation and Development (OECD) shall promote
policies designed:
- toachievethe highestsustainableeconomicgrowthandemployment
andarisingstandardoflivinginMembercountries,whilemaintaining
financial stability, and thus to contribute to the development ofthe
world economy;
- to contribute to sound economic expansion in Member as well as
non-membercountries in theprocess ofeconomic development; and
- to contribute to the expansion of world trade on a multilateral,
non-discriminatory basis in accordance with international obliga¬
tions.
The original Member countries of the OECD are Austria, Belgium,
Canada, Denmark, France, the Federal Republic of Germany, Greece,
Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal,
Spain,Sweden,Switzerland,Turkey,the United Kingdomand the United
States. The following countries became Members subsequently through
accessionatthedatesindicatedhereafter:Japan(28thApril, 1964),Finland
(28lhJanuary, 1969), Australia (7lhJune, 1971) and New Zealand
(29th May, 1973).
The Socialist Federal Republic ofYugoslavia takes part in some ofthe
work ofthe OECD (agreement of28thOctober, 1961).
Publicégalement en français.
©OECD, 1988
Application forpermission toreproduce ortranslate
allorpartofthispublicationshould be madeto:
HeadofPublicationsService,OECD
2,rue André-Pascal, 75775 PARISCEDEX 16, France.
Table of contents
Introduction 9
I. Recent trends, policies and prospects 10
1987 developments in retrospect 10
The balance-of-payments adjustment process 17
Economic policy 22
Recent trends and prospects 29
II. The slowing trend of output growth 33
The post-OPECII recovery (1982-87) compared with
the post-OPEC I recovery (1975-80) 34
A medium-term analysis: potential output and factor inputs 41
Total factor productivity 45
Technological competitiveness 48
III. Overcoming the macro- and microeconomic impediments
to growth 51
Has the economy been caught in a vicious circle? 51
Constraints on expansionary policy 64
Supply-side constraints 68
Telecommunications 70
Transportation 72
IV. Conclusions 75
Notes and references 80
Annexes:
I. Sectoral output and R&D expenditure 84
II. Calendar of main economic events 86
Statistical annex 91
Tables
Text
1. Projections and outcome, 1987 10
2. Export developments 11
3. Demand and output 12
4. Households appropriation account 13
5. Labour market developments 14
6. Costs and prices 15
7. Balance of payments 16
8. Export and import prices 22
9. Fiscal policy indicators 23
10. M3 and its counterparts 27
11. Short-term prospects 31
12. Balance-of-payments prospects 32
13. Business sector output, factor inputs and productivity 33
14. Recoveries compared 34
15. Split between output growth and inflation 35
16. Potential output by sector 42
17. Unemployment indicators 43
18. Business investment by sector and category 44
19. Total factor productivity 45
20. Business sector total factor productivity 47
21. Comparative advantage in high-technology trade 50
22. Real wage flexibility and employment rigidity 60
23. The ten largest recipients of subsidies and capital transfers 63
24. General government subsidies 63
25. Subsidies 64
26. Indicators oftransportation market, 1980-86 73
Annex tables
Al. R&D expenditure and potency 84
A2. Sectoral output, employment, productivity and real labour
costs per employee 85
Statistical annex
A. Selected background statistics 93
B. Gross domestic product by origin 94
C. Gross national product by demand components 95
D. Distribution of national income 96
E. Receipts and expenditures of general government 97
F. The balance ofpayments 98
G. Imports and exports by regions 100
H. Foreign trade by principal and commodity groups 102
I. Money and credit 103
J. Population and employment 104
K. Wages and prices 105
Diagrams
1. Relative trade volumes, terms of trade, and the current balance 18
2. Final domestic demand in selected OECD countries 19
3. Relative prices 20
4. Current account balance 21
5. Monetary aggregates 26
6. Yield structure in the bond market 28
7. Gross fixed asset formation 36
8. Volume shares ofexports and imports of goods and services 37
9. Financial balances 39
10. Business sector output and total factor productivity 46
11. Revealed comparative advantage in manufacturing industries 49
12. Potential output and capacity slack 52
13. Gross fixed asset formation and employment 54
14. Investment and employment by sector 55
15. Rate of return and long-term interest rates 56
16. Profitability and employment 58
17. Regional unemployment and wages 61
18. Potential output and real long-term interest rate 67
19. Output in manufacturing and private services 69
BASIC STATISTICS OF GERMANY (F.R.)
THELAND
Area, 1980(thousandkm1) 248.6 Majorcities,31.12.1986: Millions
Agriculturalarea, 1981 (thousandkm1) 122.0 inhabitants
Forests, 1981 (thousandkm!) 73.3
Berlin(West) 1.9
Hamburg 1.6
Munich 1.3
Cologne 0.9
Essen 0.6
Frankfurt 0.6
Dortmund 0.6
Dusseldorf 0.6
THEPEOPLE
Population,Dec. 1987 61 I490O0 Labourforcetotal, 1987 28200000
No.ofinhabitantsperkm2 246 Civilianemployment, 1987 25440000
Netnaturalincreaseinpopulation, 1987 -45287 ofwhich: Agriculture 1 327000
Netmigration, 1987 +54000 Industry 10315000
Otheractivities 13798000
PRODUCTION
GDP, 1987(billionsofDM) 2023 OriginofGDP, 1987(percent):
GNPperhead, 1987(US$) 18 380 Agriculture,forestry,fishing 2
Grossfixedinvestment(average 1985- 987): Industry(incl.construction) 42
PercentofGNP 19 Services 56
Perhead(USI) 2795
THEGOVERNMENT
Publicconsumption, 1987(percentofGNP) 19.6 CompositionofFederal Parliament:
Generalgovernmentcurrentrevenue, 1987 (percent Social Democrats(SPD) 186seats
ofGNP) 45.1 ChristianDemocrats(CDU) 174 -
Publicdebtend 1987(ratiotogeneralgovernment FreeDemocrats(FDP) 46 -
currentrevenue) 95 ChristianSocialists(GSU) 49 -
Greens 42 -
Lastelection:25.3.1987
Nextelection: 1991
FOREIGNTRADE
Exports: Imports:
ExportsofgoodsandservicesaspercentofGNP ImportsofgoodsandservicesaspercentofGNP
(average 1985-1987) 33.0 (average 1985-1987) 27.8
Mainexports, 1987(percentoftotal Mainimports, 1987(percentoftotal
merchandiseexports): merchandiseimports):
Productsofagriculture,forestryandfishing 1 Productsofagriculture,forestryandfishing 7
Basicmaterialsandsemi-finishedgoods 25 Basicmaterialsandsemi-finishedgoods 33
Manufacturedfoodsandtobacco 4 Manufacturedfoodsandtobacco 6
Otherconsumermanufactures 12 Otherconsumermanufactures 18
Investmentgoods 56 Investmentgoods 33
Otherexports 2 Otherimports 3
Total 100 Total 100
THECURRENCY
Monetaryunit:DeutscheMark CurrencyunitsperUS$,
averageofdailyfigures:
Year 1987 1.80
June 1988 1.72
Note:Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable.
This Survey is based on the Secretariat's study
prepared for the annual review of Germany by the
Economic and Development Review Committee on
7th June 1988.
After revisions in the light ofdiscussions during the
review, final approval ofthe Survey forpublication was
given bythe Committeeon28thJune1988.
The previous survey of Germany was issued in
July 1987.
Introduction
Theflagging economic expansion has regathered strength since the summerof
last year, assisted by more orderly conditions in foreign exchange markets and
improved export prospects. Both fiscal and monetary policy have been lending
support to private demand without jeopardising the impressive stabilisation gains
achievedoverthepreviousfiveyears. Thesecond stage ofthe 1986-1990 tax reform
programme was implemented at the beginning of 1988, and short-term nominal
interestrateshavebeenbroughtdowntohistoricallylowlevels. Evenso,boththerate
of unemployment, around 8 per cent of the labour force, and the current foreign
surplus, at 4 per cent in terms of GNP in 1987, have remained high.
Ifexchangeratesremainedbroadlystable,realGNPgrowthin 1988 mightwell
exceed the 2 per cent rate projected a year ago, with the rise in consumer prices
staying around 1 per cent. However, as exports have been showing unexpected
buoyancy, thecontraction ofthe real foreign balance, morethan 1 percentagepoint
of GNP in both 1986 and 1987, is projected by the OECD to be no more than
'Apercentage point. Even so, without further terms-of-trade gains, the balance-
of-payments adjustment process in nominal terms should gather momentum, and
with budgetary policy intended to provide less support in 1989, growth could slip
below 2per cent.
Part I of the present Survey, apart from reviewing economic performance in
1987andpossibleoutcomesforthe 1988-89period,assessesGermany'scontribution
to winding down international imbalances. Part II starts with a comparison of the
currentwith thepreviouspost-oil shockrecovery. It then looksintothemain reasons
fortheapparentmarked slowdownofpotential outputgrowth. Part III isdevoted to
the question of whether the German economy has become stuck on a path of low
growth,focussingonbothdemandandsupplyimpedimentstofastergrowth. Part IV
summarises the main findings of the Survey and offers some policy conclusions.