German Central Bank: Notable Reduction in Direct Investments within Germany's Borders
Recent years have seen a significant drop in direct investments into Germany, as reported by the Bundesbank. The article, published prior to the bank's monthly report, mentions that additional equity capital from other Eurozone countries has scarcely been provided since late 2021. Although investments from third countries remain positive, they have drastically reduced compared to the period between late 2019 and late 2021.
Over a two-year span, from 2020 to 2021, foreign companies invested approximately 100 billion euros in Germany's equity capital. However, the flow of investments decreased significantly to 62 billion euros until mid-2024. The preview copy implies that a noticeable break occurred in 2022, leading to less direct investment in Germany.
Key players such as the USA and the Netherlands have remained central direct investors, both before and after this break. On the other hand, the significance of investments from the UK has dwindled notably over the past 2.5 years. The Bundesbank hypothesizes that the UK's departure from the EU on January 31, 2020, may have contributed to this shift.
The root causes of the reduced influx of direct investments to Germany since 2022 remain unclear from the Bundesbank's perspective. Nevertheless, the report suggests that high energy prices in Germany could potentially be a factor, considering both cyclical and structural factors are involved.
Moreover, the intense competition for foreign investments, particularly in emerging and strategically important sectors, remains a significant issue. "Germany and Europe must demonstrate in the coming years that they remain globally competitive and capable of attracting foreign capital," the report concludes.
Despite the significant decrease in direct investments into Germany, the Bundesbank continues to monitor the situation closely. Moreover, the Bundesbank emphasizes the importance of attracting additional equity capital from other Eurozone countries, particularly in light of the scarcity since late 2021.
