This content is relevant for:Coronavirus / FDI
Business Location Germany
Although the German economy has been affected by the coronavirus pandemic, Germany’s economic downturn will be less severe than previously expected. The Federal Government's comprehensive and rapid support since the beginning of the crisis has been effective to date.
Although Germany is still in a partial lockdown, there is reason to be optimistic. The German economy assesses its current business situation more positively again. Orders in the industrial sector are rising and job levels are similarly on the increase.
According to new data from the Federal Ministry for Economic Affairs and Energy, Germany’s GDP fell by 4.9 percent in 2020. Earlier forecasts predicted a GDP slump of at least 6.3 percent. Despite the economy still remaining in semi-lockdown at the beginning of 2021, the ministry forecasts GDP growth of 3.5 percent for the year.
According to the European Commission, large catch-up and carry-over effects in 2021 and 2022 should buoy the German economy, with projected GDP increases of 3.2 percent and 3.1 percent respectively - allowing Germany to reach its pre-crisis level in 2022.
Germany’s government moved swiftly to counteract the worst effects of the crisis, introducing a far-reaching package of financial measures to safeguard health, jobs and the economy. The record aid package includes a supplementary government budget of EUR 156 billion to absorb the immediate consequences of the crisis. The complete program of help measures – including guarantees and subsidized KfW bank loans – planned represents EUR 1.2 trillion in total. By moving quickly and decisively to mitigate the worst outcomes of the crisis, Germany’s government has created the conditions to ensure that businesses – of all sizes – emerge from the crisis intact.
Germany was one of the safest investment locations worldwide before the global coronavirus pandemic. The country’s strong and stable economy now puts it on a strong footing to deal with the ongoing Covid-19 crisis. The record financial aid package– with further measures foreseen as and when required – is a sign of the German government’s commitment to ensuring that the country maintains its proud position.
A global recession now seems certain, with economic recovery only possible when the virus can be effectively contained. According to the OECD, a sharp slowdown in world growth was expected for the first half of the year as supply chains and commodities were affected, tourism fell away and business confidence faltered.
UNCTAD reports that the outbreak and spread of Covid-19 will negatively affect global foreign direct investment (FDI) flows for the period 2020-2021. Downward pressure on FDI resulted in a drop of 42 percent of FDI inflows worldwide, hitting developed countries (-69 percent) the most. Another drop of five to ten percent of FDI inflows is expected for 2021.
Despite the severe global economic downturn caused by Covid-19 in 2020, FDIs in Germany dropped by 9 percent compared to the previous year. The number of greenfield projects in Europe, for example, saw a decrease of only 15 percent in 2020. In its new FDI Reporting Report for 2020, Germany Trade & Invest recorded 1,684 FDI projects in Germany. Germany’s reputation as Europe’s most attractive business location helped to keep the slump within limits and generate a better result than expected.You can find this fragment in the following contexts: