Foreign direct investment is important for the location. Bundesbank data shows that less money has flowed into Germany in recent years. One reason: the increased energy prices.
According to an analysis by the Bundesbank, direct investments into Germany have collapsed. In the competition for foreign direct investment, the Federal Republic has lost ground compared to European industrial nations such as France or Spain, according to a specialist article published in advance from the Bundesbank’s monthly report.
“On balance, additional equity capital from other euro area countries has barely been provided since the end of 2021,” the authors wrote. Inflows from third countries are still positive, “but have leveled off significantly compared to the years between the end of 2019 and the end of 2021.” While foreign companies invested just over 100 billion euros in equity capital in Germany in 2020 and 2021, only 62 billion euros in equity capital flowed by mid-2024. Foreign direct investment is important for the location: when companies invest money in Germany, they secure jobs and prosperity.
Bundesbank: International investors are not turning away completely
“In fact, a statistically significant structural break can be identified in 2022, which led to a significantly lower volume of direct investments in Germany,” wrote the Bundesbank. At the same time, she emphasized: “A complete turning away from Germany by international investors cannot be seen from the available figures.”
While direct investors from the USA and the Netherlands played a central role “both before and after this structural break”, the inflow of funds from the United Kingdom has fallen noticeably over the past two and a half years. According to the Bundesbank, Brexit in January 2020 may also have played a role.
Germany in the international location competition
The reasons for the decline in direct investment inflows to Germany cannot yet be identified with certainty, it said. “However, as with German direct investments abroad, high energy prices here could play a role.”
The intense competition between locations for foreign investments is certainly also important. “Germany and Europe must prove in the coming years that they remain internationally competitive and able to attract foreign capital.”
Source: Stern
