Many companies with foreign business are planning higher investments outside of Germany in the coming months. Business expectations are particularly good in the United States and India.
Despite numerous trouble spots and a weak global economy, a third of internationally active German companies are planning higher investments, according to a survey. “German companies abroad are holding their own bravely,” said the head of foreign trade at the German Chamber of Commerce and Industry (DIHK), Volker Treier, today about the results of a company survey by foreign chambers of commerce. It was evaluated by the DIHK.
In Europe and China, business expectations fell. China is currently the “big problem child,” said Treier. “Consumer demand there is more or less at rock bottom.” A few months ago there was still great hope that the end of the Corona restrictions in the People’s Republic would lead to a significant upswing.
In addition to the economic aftermath of the corona pandemic, according to the DIHK survey, 18 percent of companies also cited the “derisking” aimed at by the federal government as the dominant reason for an investment decision. The intention behind this strategy is not to become too dependent on China in view of geopolitical risks in critical areas.
Growth market India
The Indian market, on the other hand, is developing positively: For India, the managing director of the local Chamber of Foreign Trade, Stefan Halusa, reported a young and consumer-friendly population. This is evident in car purchases, but also in electronics purchases. “It is no longer just the entry-level segment that is growing, especially in terms of consumption, but the middle and upper segments are sometimes growing faster,” said Halusa.
India also invests a lot of money in infrastructure; new railway lines are regularly put into operation and airports are built. “When it comes to finding a complement to China in terms of market size and market potential, India is almost certainly one of the countries that companies should look at very first,” said Halusa.
Less bureaucracy than at home
Overall, German direct investments, which amount to almost two trillion euros, are expected to increase by 100 billion euros in the coming years, according to the DIHK forecast. There is also expected to be an increase in employment of between 80,000 and 100,000 jobs. There are currently eight million employees working in German locations abroad. The USA in particular benefited from the job creation, said foreign trade chief Treier, with a view to incentive programs such as the Inflation Reduction Act (IRA).
22 percent of the 3,600 German companies surveyed abroad expect that the economic situation at their locations will improve. 28 percent expect things to get worse. This is consistent with the fact that the willingness to invest has declined somewhat over the past twelve months, as shown by the study by the DIHK and the German Chambers of Commerce Abroad. A fifth of companies are planning to reduce investments at their international locations.
“Unlike in Germany, we at least see a certain spirit of optimism among German companies abroad,” said Treier. The companies were also struggling with a difficult economic situation in other locations, but with fewer structural challenges, such as too much bureaucracy, than in Germany. The bottom line is that the DIHK expects below-average growth in the global economy of 2.5 percent for 2024.