Rapid shift observed in investor perspectives, as per KfW leader's statement
Germany's Big Comeback: KfW Chief Reports a Surprising Change in Investor Attitudes
In a surprising turn of events, foreign investors are moving towards Germany in droves, according to Stefan Wintels, the head of KfW development bank. This sudden shift, which has never been witnessed in his 30-year career, has made this the ideal moment to engage with these massive investors.
Wintels shared his insights after attending promotional events in New York, London, and Zurich. Many institutional investors, he says, are overburdened with investments in the USA and are looking to invest heavily in Europe, particularly in Germany.
The Allure of Germany
The coalition agreement contains several attractive factors, as per Wintels, such as modernizing infrastructure, reducing bureaucracy, digitization, a commitment to qualified immigration, and adherence to the 2045 climate targets. For investors, reliability and stability are paramount, he notes, and the unsettling actions of the US government have made markets jittery. "The political stability we have in Germany is a veritable treasure that ought to be nurtured," Wintels says.
Capital from Every Corner of the World
Capital from Asia, the Middle East, Britain, the USA, and Canada is essential to finance the planned investments, according to Wintels. If the required resources aren't sourced from abroad, the enormous sums needed in the coming years will not be obtainable.
A Changing Investment Landscape
While foreign investment in Germany has decreased for the third consecutive year, the financial market's sovereignty in Germany and Europe remains vital. "We've got this in the bag," says Wintels. The necessary funds are available - an astonishing €9 trillion in private financial wealth resides in Germany, and €30 trillion in Europe. However, the European financial industry's heavy regulation has pushed financial institutions and insurers to abandon financing that resembles equity. Wintels demands an examination of where regulations might be altered without jeopardizing the financial system's stability.
Germany's Slump in Europe-wide Rankings
A recent report from auditing and consulting firm EY states that US companies' engagement in Germany will decrease rapidly by 2024, with a 27 percent fall in investment projects to 90. Compared to other countries, this decline is more significant, making Germany one of the least popular destinations among European countries for FDI. Overall, the number of foreign investment projects in Germany slumped to 608 in 2022, a drop of 17 percent from the previous year and the lowest figure since 2011.
A Silver Lining in Inflation
The German economy, despite confronting inflationary pressures, has displayed unexpected robustness. To stimulate the economy, the government plans to introduce tax relief measures as early as this week, with the tax-based investment acceleration program projected to amount to around €46 billion by 2029. The package includes improved depreciation options for electric vehicles and a "Investment Booster" allowing companies to deduct movable assets like machinery at up to 30 percent each for the current and next two years.
- Investments in infrastructure
- Job Creation
- Tax Relief
- KfW
- Economic Recovery
- Foreign Investment
Further insights:
- Changes in FDI trends: In 2024, FDI is projected to decrease by 2 percent in Germany, but the volume of investments will remain the third-highest on record, at €23.2 billion[1][3].
- Investment sectors: Investments have been notably strong in digitization areas, energy & resources, electronics, and automation[5].
- Key investors: The United States remains the primary foreign investor in Germany, with significant investments from companies such as Amazon and Microsoft[5]. Other significant investors include Switzerland and China[5].
- The KfW chief, Stefan Wintels, has reported a significant increase in foreign investments towards Germany, particularly in infrastructure sectors, due to the coalition agreement's attractive factors such as modernizing infrastructure, reducing bureaucracy, digitization, qualified immigration, and adherence to the 2045 climate targets.
- In order to finance the planned investments, Wintels emphasizes the need for capital from various regions, including Asia, the Middle East, Britain, the USA, and Canada. This is because the enormous sums required in the coming years might not be obtainable without sourcing resources from abroad, as the domestic financial industry's heavy regulation has pushed financial institutions and insurers towards abandoning financing that resembles equity.
