© anucha sirivisansuwan / Moment / Getty Images
Internationally active companies are feeling major challenges in their business environment in almost every corner of the globe. But at least the economic outlook in many regions is not as pessimistic as in Europe and Germany, as the current AHK World Business Outlook shows.
The survey of more than 3,100 German companies active abroad makes it clear: from the point of view of international German companies, the global economy is facing a frosty winter. The main reasons are the economic consequences of the Russian war against Ukraine and China's zero-covid policy.
According to the survey, almost every second company (47 percent) expects an economic downturn at its respective location. Only in spring 2020, at the beginning of the Corona pandemic, did more companies (65 percent) expect an economic slowdown. In contrast, only 17 percent (spring: 21 percent) expect the economy in their host country to improve in the next twelve months. While the outlook is worsening especially in Europe, companies in the Asia-Pacific region (excluding China), Africa, the Near and Middle East, as well as South and Central America and North America are less pessimistic.
Despite less hopeful economic expectations, German companies in international locations are still robust: almost half (45 percent) of the companies, similar to the previous survey (48 percent), report a good business situation. For 45 percent, too, current business is satisfactory. Only every tenth company (spring: 11 percent) reports a poor business situation.
Volker Treier
© DIHK / Werner Schuering
"The catch-up effect of order backlogs in industry, the new start for service providers after the end of the Corona restrictions, as well as easing in some places in global supply chains, should not obscure the fact that the strained global economy is also making itself felt among German companies abroad," says DIHK head of foreign trade Volker Treier. "Depending on their respective international markets, however, they find stable, if not even advantageous conditions, which in turn give confidence."
Thus, despite concerns about an economic downturn, companies at their international locations are still mostly optimistic about the development of their own business in the coming months: 37 percent of the companies (spring: 42 percent) expect better business in the coming twelve months. 42 percent expect business to remain at the same level as in the current situation, while 21 percent (spring: 15 percent) expect less good business.
This means that foreign companies are much more confident about the future than companies in Germany: according to the DIHK business survey autumn 2022, only 8 percent expect better business in the next twelve months, while 52 percent expect worse.
Nevertheless, the worry lines are also growing among German companies active abroad. "The current crises are manifold and their effects are difficult to assess," says Treier, head of foreign trade. "Our companies tell us of concerns they have about geopolitical developments, a progressive decoupling and a looming recession in the global economy."
Just over two in five companies (42 percent) continue to cite ongoing supply chain disruptions as a significant risk to their overseas business against the backdrop of the multi-week lockdowns in China and the impact of the Corona pandemic. In addition, there is turbulence on the world markets for raw materials and energy, triggered or exacerbated by the Russian war in Ukraine.
Accordingly, a large proportion of companies complain about high raw material prices (42 percent) and high energy prices (41 percent) - albeit with clear regional differences. While 57 percent of companies in the Eurozone see high energy prices as a major risk for their own business, only 24 percent in North America do. Apart from that, declining consumer demand is also increasingly making itself felt among businesses (41 percent), as purchasing power is reduced by high inflation rates.
Although only 21 percent of the companies in our transatlantic partners expect the economic situation to brighten and 42 percent expect the economic performance to deteriorate, companies find attractive conditions in the North American market, mainly because of the comparatively favourable energy prices, and thus assess their own business situation and future business prospects more optimistically than in any other region. Accordingly, 62 percent of them assess their own business as good, only 3 percent as poor.
Matthias Hoffmann
© AHK USA
"For US companies, the war in Ukraine is far away, so the economic consequences are less noticeable," confirms Matthias Hoffmann, Executive Director of the German-American Chamber of Commerce for the Southern United States in Atlanta. "A recession cannot be ruled out here in the US either, but the government is currently taking measures to stabilise the market and give companies confidence in their future business."
The full survey is available here:
AHK World Business Outlook Fall 2022 (PDF, 1 MB)
The AHK World Business Outlook is based on a regular DIHK survey of member companies of the German Chambers of Commerce Abroad, Delegations and Representative Offices (AHKs). It collects feedback from more than 3,100 German companies, branches and subsidiaries worldwide as well as companies with close ties to Germany in Fall 2022. The sur- vey was conducted from 4th to 23rd October 2022.
41 percent of the responding companies are from the industry and construction sector, 36 percent from the service sector and another 23 percent are trading companies. Smaller companies with less than 100 employees account for 47 percent of the responses. 26 percent of the companies employ 100 to 1,000 people. Large companies with more than 1,000 employees account for 27 percent of respondents worldwide.
