Printer Friendly

THE ECONOMY IN EASTERN GERMANY: ADJUSTMENTS CONTINUE IN 1992

 THE ECONOMY IN EASTERN GERMANY: ADJUSTMENTS CONTINUE IN 1992
 FRANKFURT, Germany, April 15 /PRNewswire/ -- Real GNP growth of 10 percent in the New Federal States expected for this year will be led by growth in the construction and services sectors, writes Deutsche Bank Research, a subsidiary of Deutsche Bank AG, in its latest version of the "Focus Germany" series. Nevertheless, in light of some $86 billion in public transfers to the east in 1991 and a larger sum projected for 1992, DB Research concludes that, "There can be no talk yet of a self-sustaining economic upswing this year."
 The construction industry will provide the main impetus for growth in 1992, with orders almost doubling since spring of 1991. Public contracts for infrastructure development -- like the approximately $34 billion to be spent on transportation projects this year -- drive a large part of new demand, notes DB Research.
 Industrial and private construction are also playing an important role, mostly because of the poor condition of housing and commercial property in the New Federal States. Government transfers play an important role here as well, with more than 10 percent of east German apartments (approximately 750,000) renovated in 1991 with public funds.
 As for the service sector, banks and insurance companies led expansion in 1991. DB Research writes that, by the end of that year, approximately 200,000 east Germans were self-employed in the service industries, almost double the number in 1990 and in sharp contrast to the 40,000 employed in the service sector before unification.
 Overall, the service sector constituted approximately 40 percent of east German GNP in 1991. Since this share remains markedly lower than that of other highly industrialized countries, the institute predicts above-average sectoral growth in the medium term.
 In contrast to these growth sectors, industrial output fell by 22 percent in 1991, writes DB Research, due largely to both the uncompetitiveness of old industries and the collapse of the Comecon trading system in eastern Europe. Eastern Germany contributed only 6.9 percent of total German GNP in 1991; "net imports" of goods from western Germany reached $104 billion last year.
 At 38 percent in 1991, investment as a share of nominal GNP in the New Federal States was nearly twice as high as in western Germany. However, investment measured as a share of domestic demand -- including imports and transfers -- drops to 23 percent, more comparable to that in western Germany. Aggregate public and private investment in eastern Germany reached $43 billion in 1991. This figure should rise to about $61 billion in 1992, with the private sector accounting for slightly less than half of that amount.
 Expected growth impulses in 1992 will come primarily from investment in machinery, equipment, and construction, according to DB Research. Problems still remain, however, in the form of eastern Germany's antiquated capital stock and non-competitive products, which will require much higher capital spending than that already slated for 1992.
 To bring production up to west German standards, one recent estimate has put the necessary amount of investment per workplace at $123,000. This means that current projected investment volume of $61 billion for 1992 will ensure only 500,000 new jobs. The jobless count already reached 1.34 million in January 1992.
 In conclusion writes DB Research, while the need for greater investment remains, private domestic and foreign entrants to the market continue to be discouraged by the cumbersome ownership-claims process and a "wage-convergence" policy forcing wage hikes ahead of increases in productivity.
 For a copy of the complete text, contact Ute DeFarlo, TransAtlantic Futures, Inc., 202-462-1222 or fax 202-462-1229.
 -0- 4/15/92
 /CONTACT: Rutger Teusher of Deutsche Bank Research, 011-49-69-7150-4722/ CO: Deutsche Bank Research ST: District of Columbia IN: FIN SU:


DS -- DC004 -- 8546 04/15/92 09:39 EDT
COPYRIGHT 1992 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:Apr 15, 1992
Words:630
Previous Article:NBD INTRODUCES FREE SMALL BUSINESS CHECKING ACCOUNT
Next Article:IMMUNOMEDICS AWARDED ORPHAN DRUG DESIGNATION FOR LYMPHOMA IMAGING AGENT; MAY DETECT LYMPHOMAS IN HIV-INFECTED PATIENTS


Related Articles
MODERATE RECOVERY IN SIGHT FOR EASTERN GERMANY'S EXPORT SECTOR
Statistical needs in Eastern Europe.
GLOBAL ECONOMIC MOTOR STILL RUNNING ON ONLY THREE CYLINDERS
HUNGARY'S PROSPECTS BRIGHTENED BY STRONG EXTERNAL ECONOMY
FIRST EASTERN REPORTS RESULTS FOR SECOND QUARTER
FIRST EASTERN REPORTS RESULTS FOR SECOND QUARTER
DEUTSCHE BANK RESEARCH EXPECTS WEST GERMAN INFLATION AT 3.6 PERCENT FOR 1993
REVISED FORECAST FOR EAST GERMAN GROWTH
MINE SAFETY APPLIANCES REPORTS EARNINGS
World economy.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters