The German economy--the fifth-largest economy in the world in purchasing power parity (PPP) terms and Europe's largest--is a leading exporter of machinery, vehicles, chemicals, and household equipment and benefits from a highly skilled labor force. Like its Western European neighbors, Germany faces significant demographic challenges to sustained long-term growth. Low fertility rates and declining net immigration are increasing pressure on the country's social welfare system and necessitate structural reforms. The modernization and integration of the eastern German economy--where unemployment can exceed 20% in some municipalities--continues to be a costly long-term process, with annual transfers from west to east amounting in 2008 alone to roughly $12 billion. Reforms launched by the government of Chancellor Gerhard Schroeder (1998-2005), deemed necessary to address chronically high unemployment and low average growth, contributed to strong growth in 2006 and 2007 and falling unemployment, which in 2008 reached a new post-reunification low of 7.8%. These advances, as well as a government-subsidized, reduced working hour scheme, helped account for the relatively modest increase in unemployment during Germany's 2008-2009 recession--the deepest since World War II. GDP grew just over 1% in 2008 and contracted roughly 5% in 2009. Germany crept out of recession in the second and third quarters of 2009, thanks largely to rebounding manufacturing orders and exports primarily outside the Euro zone and relatively steady consumer demand. The German economy is expected to recover with about 1.4% growth for 2010. However, the relatively strong euro, tighter credit markets, and an anticipated bump in unemployment could cloud Germany's medium-term recovery prospects. Stimulus and stabilization efforts initiated in 2008 and 2009 and tax cuts introduced in Chancellor Angela Merkel's second term will add to Germany's record-high public debt, which is expected to exceed 5% of GDP in 2010. The European Union (EU) has given Germany until 2013 to get its consolidated budget deficit below 3% of GDP. A new constitutional amendment likewise limits the federal government to structural deficits of no more than 0.35% of GDP per annum as of 2016.

GDP (2008 nom.): $3.673 trillion.
Annual growth rate: (2006) 2.7%; (2007) 2.5%; (2008) 1.7%; (2009 est.) -5%.
Per capita GDP (2008 nom.): $44,728.
Inflation rate (February 2010): 0.30%.
Unemployment rate: (2007) 9.0%; (February 2010) 8.6%.
Natural resources: Iron, hard coal, lignite, potash, natural gas.
Agriculture (0.9% of GDP in 2007): Products--corn, wheat, potatoes, sugar, beets, barley, hops, viticulture, forestry, fisheries.
Industry (26.0% of GDP in 2007): Types--car-making; mechanical, electrical, and precision engineering; chemicals; environmental technology; optics; medical technology; biotech and genetic engineering; nanotechnology; aerospace; logistics.
Trade (2008): Exports--$1.498 trillion: chemicals, motor vehicles, iron and steel products, manufactured goods, electrical products. Major markets--France, U.S., and U.K. (2008). Imports--$1.232 trillion: food, petroleum products, manufactured goods, electrical products, motor vehicles, apparel. Major suppliers--France, Netherlands, Belgium, China.