IW: Germany faces deindustrialisation amid investment outflows

BERLIN: High investment outflows from Germany in recent years are a sign of looming deindustrialisation, the German Economic Institute (IW) said on Thursday, Xinhua reported.

Foreign investment in Europe's largest economy hit its lowest level in 10 years in 2023, down to €22 billion (US$24 billion), according to the IW. German companies invested more than five times as much abroad, resulting in net outflows of €94 billion.

The outflows had been even higher at €100 billion in 2021 and €125 billion in 2022. "The recurring high net outflows indicate that these are not exceptional phenomena but the first symptoms of deindustrialisation," the IW said.

Many of the foreign investments made in Germany last year were smaller acquisitions or projects.

This was an "indication of the unfavourable location conditions in global competition," the IW said.

In a recent comparison of 21 international business locations by the Centre for European Economic Research (ZEW), Germany was the "biggest loser," dropping four ranks since 2020 to 18th place.

Germany developed negatively in terms of taxes, regulation, and infrastructure, and could "hardly keep up" with leading business locations in North America, Western Europe, and Scandinavia as a result, the ZEW said.

Because of high energy costs, more than four in ten German industrial companies are looking to invest abroad as cost savings are increasingly becoming a key issue, according to a survey published by the German Chamber of Commerce and Industry (DIHK) on Tuesday.

The fact that these companies were moving abroad at the expense of the business location was "an alarming signal," said Ilja Nothnagel, a member of the DIHK executive board.

The government is well aware of the problem. Finance Minister Christian Lindner said last month, "Germany is falling behind because there is no growth".

After the country saw a contraction of 0.3 per cent in 2023, many experts fear a deeper slide into recession this year. (1 euro = 1.09 U.S. dollar).