Performance overview: Germany
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Despite a slight improvement in its overall score, Germany drops one place to 5th. Its macroeconomic environment is generally stable, with a very low government deficit, yet—like the rest of the euro zone—it faces near-zero inflation. The country continues to push the innovation frontier, ranking high on the pillars of technological readiness (10th), innovation (5th), and business sophistication (3rd). Germany does well in efficiently using its talent (14th), supported by management practices that encourage worker involvement. As recent empirical evidence suggests, this type of decentralized management is effective in incentivizing quality upgrades and other types of product improvements,26 which in turn boost export competitiveness.27 An important labor market challenge for the coming year will be the integration of the large numbers of migrants, many of whom arrived over the course of 2015; first steps have been taken to lower labor market entry barriers for asylum seekers.28 An improvement from 82nd to 65th is registered in an important business environment indicator, as the number of days to start a business is reduced from 14.5 to 10.5. Yet the data show a longer-term deterioration in another dimension of the business environment with a drop to 58th on the security indicators.