The German economy will expand by over 3 per cent in 2011, with this growth supported by strong exports, a secure financial sector and a relatively small budget deficit, Oliver Maslowski, manager of the JB German Value Fund at Swiss & Global Asset Management, said in a note.

Sustained growth from emerging market consumers has boosted the demand for German exports in recent times and looks set to continue for the foreseeable future, says the fund manager in a report. Emerging markets are demanding German products as the country has a reputation for producing high quality and innovative goods, said Maslowski.

This has led to German exports increasing from 33 per cent of gross domestic product in 2000 to 46 per cent of GDP in 2010, he added. The report also said the rest of Europe has seen a decline in exports over the same period, making Germany the largest exporter of manufactured goods in Europe and the second largest worldwide, behind China.

Maslowski predicted a continued trend in strong German exports as the middle classes in emerging markets expand, thus increasing demand for appropriate products. He highlighted Volkswagen as an example of a company that has benefited from this so far, and goes on to forecast that rival car manufacturer Audi will sell more products in China than in Germany this year.

Furthermore, the demand for smartphones and tablet personal computers is accelerating in emerging markets, which may attract investors to the German telecommunications and technology sectors, he said, and cited Drillisch and Freenet as two companies with a strong performance outlook.

The German energy sector will be less attractive to investors in the short term as the industry’s production will be hit by the country’s new energy policy, aimed at making the industry more efficient and eco-friendly over the long term, said Maslowski.

Another broader risk to investors in the nation continues to come from the sovereign debt crisis, with continued fears that the crisis could spread further than Greece, he added. Swiss and Global will be keeping a close eye on Germany’s spending allocation over the coming months as it believes this will be crucial to the nation’s overall performance.

Nonetheless the outlook for investment into Germany looks strong on the whole, especially with the attractive stock valuations currently seen across its industries and earnings ratios looking increasing positive, said Maslowski. In addition, while the sovereign debt crisis continues to pose a threat to Germany, the nation’s own debt levels are significantly lower than other European countries, which is something Maslowski said should be taken into consideration when investors are making their allocation decisions.