Staggering Drop in Foreign Investment in Germany for a Third Year Running
Investment from foreign sources experiences a decline for the third year in a row within the boundaries of Germany
Despite being a highly sought-after location, foreign investments in Germany plummeted for the third consecutive year in 2024. Germany Trade & Invest (GTAI), the state promotional agency, revealed that only 1,724 new settlements and expansions were registered last year, contrasting the 1,806 projects in 2021. This equates to a disappointing two percent decline.
European foreign direct investments dipped by 4.6 percent last year, and even more so in Western Europe (almost 6 percent), according to GTAI CEO Robert Hermann. Unlike the continent's steady growth, Germany's economy experienced a second year of contraction, sparking heated debate on the nation's declining competitiveness.
The total investment announced by foreign companies amounted to a considerable 23.2 billion euros. Although it's less than the record years of 2023 (34.8 billion euros) and 2022 (25.3 billion euros), which were boosted by catch-up effects from the coronavirus pandemic, it surpasses the combined totals for the years 2019 to 2021. "We're witnessing many massive investments," said Hermann, with seven projects exceeding the 500 million euro mark. Nearly two percent of all projects held a volume of at least 100 million euros.
tech heavyweights' colossal ventures
Amazon leads the pack with an ambitious 8.8 billion euro investment in cloud infrastructure for Amazon Web Services (AWS) in the Rhine-Main region, accompanied by an additional 1.2 billion euros for logistics, robotics, and corporate headquarters. Microsoft follows with a 3.2 billion euro investment in AI infrastructure and cloud capacity, while Apple plans to pump significant funds into expanding its research center in Munich.
With the USA as the biggest foreign investor, due to these three significant projects, a total of 229 projects originated from the United States in 2024. Switzerland follows suit with 202 projects, then China (199), the UK (137), and the Netherlands (97). Roughly 31,000 new jobs were announced by investors, the most since 2020. "However, we anticipate further job creation, as job plans are not always disclosed," Hermann pointed out. The bulk of projects are concentrated in digitalization (17%), energy & resources (16%), and electronics and automation (15%).
factors contributing to the droop in foreign investment
- Global Economic Instability: The worldwide economic downturn, combined with increasing inflation and interest rates, has instilled a sense of caution among businesses regarding foreign investments. This unease affects Germany as well, as companies often choose to invest in markets with more stability or rapid growth.
- Trade Tensions and Geopolitical Risks: Ongoing trade disputes between major economies like the EU and the U.S., as well as global tensions, can deter foreign investment. These uncertainties discourage investors from committing to long-term projects in Germany.
- Regulatory Changes and Domestic Challenges: Alterations in regulatory environments or domestic economic challenges, like the need for energy transition and infrastructure development, can impact investor confidence.
- Energy transition and supply chain disruptions: The shift towards renewable energy sources and disruptions in supply chains due to the COVID-19 pandemic and other international events have posed obstacles for investors, particularly in manufacturing and energy sectors.
For the most current and precise information, consulting reports from the German Federal Statistical Office (Destatis) or the German Trade and Invest organization (GTAI) is highly suggested.
- The significant decline in foreign investments in Germany for the third consecutive year in 2024 could potentially be linked to the global economic instability, as increasing inflation and interest rates might instill caution among businesses, making them less likely to invest in foreign markets like Germany.
- Amidst discussions about Germany's declining competitiveness, it is also essential to consider the impact of trade tensions and geopolitical risks, as ongoing disputes between major economies and global tensions can deter foreign investors from committing to long-term projects in Germany due to the uncertainties they present.
