Germany remains leading FDI Destination

Germany continues to hold its position as Europe’s leading destination for foreign direct investment (FDI), even as the number of foreign companies setting up operations in the country declined by almost 20% in 2023. Germany Trade & Invest reported this information, citing a trend seen in other European countries like France and Switzerland, where FDI levels also decreased due to companies opting for mergers and acquisitions amid uncertain economic conditions.

While the number of projects declined, the value of pledged investments was higher than in previous years. BP, for example, plans to invest €6.8 billion ($7.36 billion) in two wind farms in the North Sea, and Virtus, a London-based data center provider, announced a €3 billion ($3.22 billion) mega-campus project near Berlin.

According to Glenn Barklie, Head of FDI Services at GlobalData, the majority of countries are experiencing a downtrend in inward investment projects in 2023, with a projected 25% drop in global FDI projects for the year. The cautious investment climate is influenced by factors such as a shaky macroeconomic environment, rising geopolitical tensions, inflation concerns, high-interest rates, and climate considerations.

A survey by the German Chamber of Industry and Commerce (DIHK) in November revealed that approximately one-third of German companies (33%) are planning to invest abroad due to fears of a domestic recession. The IFO Institute, a Munich-based economic think tank, anticipates a 0.6% contraction in Germany’s economy in 2023.

Despite the current challenges, Barklie expects Germany’s economy to rebound strongly in 2024, emphasising that Germany will maintain its status as the leading destination for FDI in Europe and one of the top global destinations. The decline in FDI projects reflects a broader global trend influenced by economic uncertainties and geopolitical factors.