UK vs Germany Economy

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David Cameron and Angela Economic UK Vs German Merkel

Policy Analysis

Presented by: Group -1, Section A, MBA Part Time(2010- 13)(IB) Bhawna Gosain (16) Dhiman Ray (21) Kumar Goyal(37) 4/28/12 Chetanya Vali(18) Diksha Purohit(22) Mayank Agarwal (43)

Snapshot of UK EconomyGDP at current prices in $ Billions (1980 2010)

#3rd largest in Europe (by nominal GDP)

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#1st Germany #2nd France

#6th largest globally (by nominal GDP) #7th largest measured by PPP Population (2011): 62.6 million Capital London is the world's largest financial centre alongside New York Had the 3rd largest stock of both inward and outward foreign direct investment (As of Dec 2010) Per capita GDP (2010): $34,800 Inflation (CPI): 4.2% (As of Dec 2011) GDP by Sector:

Investment as a % of GDP (1980 2010)12 10 8 6 4 2 0

Click to edit Services 77.1% Industry 22.1% Agriculture 0.9%

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P P

Exports (2010): $410.2 billion Imports (2010): $563.2 billion

Source: IMF, CIA Fact Book

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Snapshot of Germany Economy

#1st largest in Europe (by nominal GDP)

GDP at current prices in $ Billions (1980 2010)12 10 8 6 4 2 0

#2nd France #3rd UK

#6th largest globally (by nominal GDP) #5th largest measured by PPP Population (2011): 81.4 million Per capita GDP (2010): $35,700 Inflation (CPI): 1.1% (As of Dec 2011) GDP by Sector:

Services: 71.3% Industry: 27.8% Agriculture: 0.9%

Investment as a % of GDP (1980 2010)12

P P

P

Exports (2010): $1.303 trillion (2010 est.) Click to edit Master subtitle style Germany was the world's top exporter for most of the noughties, only being surpassed in 2009 by China. Imports (2010): $1.099 trillion (2010 est.)

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Source: IMF, CIA Fact Book

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Challenges faced by the UK Economy1980-1990 Thatcher Era

1979 marked new approach to economic policy, including privatisation and de-regulation Single European Act (SEA) allowed for the free movement of goods within the European Union By the end of 1986, UK was enjoying an economic boom Early 1990s recession was officially the longest in UK Economic growth was not re-established until early 1993 1997:New Govt. under Tony Blair renewed confidence Introduced minimum wage and gave power to Bank of England to set up interest rates

1990-2000 From recession to reforms

Growth rates were consistently between 1.6% and 3% from 2000 Click to edit Master subtitle style 2000-2010 to early 2008 Slowing growth UK entered its worst recession since World War 2 in 2008 and Credit crisis Bank of England pumped 200bn of new capital through the

process of quantitative easing

2011 - ?? What to expectSource: IMF, BBC, HM Treasury

Sovereign debt crisis plaguing the Euro zone Entire Europe reeling under recession and contraction UK economy 'to face bigger downturn??

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Challenges faced by the German Economy1980-1990 East VS West

Changes in domestic policy and a more conducive environment abroad placed West Germany back on the path of growth. East Germany had been the powerhouse of Eastern Europe and Russia had relied upon it to produce machine tools, chemicals and electronics. However, this became extremely inefficient, with its currency becoming worthless outside of its own borders.In the year 1990, it enthusiastically underwent reunification with its western counterpart. The merger led to an economic slump, partly because of the loss of its market in the former Soviet Union as well as the inefficiencies that the communist system had left behind. Germany witnessed weak economic growth since reunification in 1990. Economic growth had averaged around 1.9% during 199199. This was due to the fall in private domestic consumption and industrial production, especially in the eastern states.

1990-2000 The Burden of bad marriage

Growth improved to 3.2% in the merchandise exports and Click to edit Master subtitle style2000, owing to the riseainmassive 276% year-on-year 2000-2010 foreign direct investment (FDI), which increased by

The Growth Story

In 2008, Germany was Europes largest economy in terms of GDP, followed by the UK and France. The countrys economy shrank by 4.9% in 2009 The services sector dominates the economy, with 72% contribution to the GDP

2011 - ??

The German economy is ticking over nicely. Industrial capacity utilization is now well above its long-term average. Industry is as upbeat about the current situation as it was at the peak of the last upswing in late 2006/early 2007, the services sector even more so. Companies have been recruiting heavily; the number of people in work in the economy as a whole has risen by more than 450,000 over the past year, said Michael Heise, chief economist

Source: IMF, BBC, HM Treasury

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Germany Vs United KingdomGermanySize Of Economy

United Kingdom

The economy was worth 1.7trillion atNational output was 1.4trillion last the end of 2007, making it Europe'syear, or 22,950 per head. The biggest. Per head of population, its grossOECD is predicting the deepest domestic product is 20,731. Therecession of any Group of Seven Organisation for Economic Co-operationnation next year, with a 1.1% dive and Development expects Germany'sin GDP. The recovery will be 0.9% economy to contract by 0.8% next year,in 2010. and rebound by a modest 1.2% in 2010.

Economic Break down World's

champion exporter, beating evenIndustry comprises 18% of the China and Japan. Industry makes upeconomy, but this is significantly nearly a quarter of its economy, whilebolstered by North Sea oil. Services services are about 60%. Construction is aincluding banks, insurance and relatively modest 3.6%. retail, are three-quarters of output. Construction is 6%.

Population

Europe's most populous nation but officialCurrently 61m, but likely to reach projections suggest this will not always be77m by 2060 - overtaking Germany the case. Its 82m headcount is expected- because of a high birth rate and to shrink by 12m by 2060 because of lowcontinued immigration birthrate.

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Germany Vs United Kingdom

Current capita GDP perAccount balance in USD billion12

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Germany Vs United Kingdom

Investment and Saving % of GDP

Human Development IndexYear 2011 2010 2009 2008 2007 2006 2005 2000 1995 1990 1985 1980 Germany 0.905 0.903 0.900 0.902 0.901 0.898 0.895 0.864 0.835 0.795 0.745 0.730 United King dom 0.863 0.862 0.860 0.860 0.856 0.853 0.855 0.833 0.816 0.778 0.759 0.744 World 0.682 0.679 0.676 0.674 0.670 0.664 0.660 0.634 0.613 0.594 0.576 0.558

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GermanyFiscal Stimulus

United Kingdom

Berlin has been attacked across Europe because ofFiscal measures, including the VAT its apparent reluctance to cut taxes and lift publiccut announced last month, amount to spending to support the economy. The fiscalaround 20bn, or 1% of GDP. stimulus is most commonly calculated at 10bn, or around 0.5% of GDP, but if measures adopted back. in October are included, the boost rises to 1.3% of GDP more than Britain's. At 7.1%, joblessness has been a scourge for yearsHas been enjoying a resilient jobs not least because of East Germany's post-market, with near record levels of communist hangover. employment, but there are fears the good times are over. Unemployment stood at 5.8% in September but OECD forecasts suggest it could reach 8.2% by 2010.

Unemployment

Public Debt

Has been relatively high for decades, currentlyRelatively low compared with many standing at an alarming 65% of GDP or 1.1trillion.other European nations. But at 44% This helps to explain why the government ofof output, or 616bn, gross debt is chancellor Angela Merkel is so anxious to reducestill a worry and is set to grow. the burden on the economy.

Public Spending

Despite its reputation for bloated government,Public spending has been soaring Germany's public spending actually consumes aunder Labour, though the Treasury's slightly smaller share of the economy than inlatest plans envisage a sharp Britain, at 43.8% of GDP last year. slowdown in growth. Spending was 44.4 per cent of GDP last year.

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GermanyTax Take

United Kingdom

Roughly comparable with that of the UK,Government revenue amounts to 42% of GDP, or at nearly 44 % of GDP. Its top rate ofnearly 550bn according to latest figures. income tax is 45%, but there areFollowing the Pre-Budget Report the UK is additional levies. introducing a new 45% top rate of tax, putting it in a similar position to Germany.

Inflation

Has been running at half UK rate lately,Inflation is slowing, with some warning of in part because consumers aredeflation, but it remains high. Inflation was sheltered from swinging increases inrecorded at 4.5% in October. utility bills. Inflation rose 2.5% inin 2010 October. Has enjoyed much lower interest ratesHas enjoyed much lower interest rates than than Britain until recently. The EuropeanBritain until recently. The European Central Central Bank's main rate currentlyBank's main rate currently stands at 2.5%. stands at 2.5%. Its world-beating manufacturing sectorHas consistently run trade deficits in recent has ensured Germany runs ayears as we suck in more goods than we export. comfortable trade surplus. This wasThe gap stood at 3.9bn in October 2010 recorded at 15bn in October. But with world demand declining sharply, Germany will not be immune from world recession. Has been in a state of perpetualProperty is Britain's Achilles heel, soaring to stagnation in recent years with propertyhyper-inflated levels in a decade-long surge that values currently at around 150,000. ended last year. In November the annual fall was recorded at 16% by Halifax, and few expect the slide to abate soon

Interest Rates

Trade Balance

Housing Market

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Germans Economic Analysis

German Debt has been increasing sharply in recent years, as a result of bank bailouts, and at around 80% is even higher than the UK's. If it has to rescue many more banks in a eurozone meltdown scenario, the figure is only likely to climb higher German model 'mittelstand, where specific support is given to MSB-championing, nurturing and encouraging midsized firms so that more of them grow and create jobs. Trade is the key to the German Economy, German industrialists make much of the strength of their manufacturing. The country makes things that others want to buy particularly in growing economies, and particularly in China. Quality and precision are qualities which have helped 4/28/12 German companies sell their product abroad

UK Economy Analysis

Large gains from on its investments abroad selling creative, legal, accounting and banking services rather than Manufacturing economy would benefit from immigration which would boost the working age population. The high pound through the late 1990s and early part of the last decade forced many manufacturers out of business. But there is strength in the servicing side of manufacturing, which is where the real money lies Britain's bounceback from recession is among the weakest in the EU,barring Portugal and Greece. UK debt is larger than any in Europe except Greece as a proportion of GDP if household, business and bank debt is added to government borrowing about 460% of GDP 4/28/12