AHK World Business Outlook Fall 2023

"We are currently experiencing a very intense phase with a lot of light and shadow in international business," said Volker Treier, Chief Executive of Foreign Trade at DIHK, during the presentation of the AHK World Business Outlook for Fall 2023.

The German Chamber of Commerce and Industry (DIHK) and German Chambers of Commerce Abroad gathered the assessments of more than 3,600 German companies at their respective locations.

Currently, 22 percent of companies expect a better economic development at their respective locations, while 28 percent anticipate a downturn.

Internationally, at least, there is "a certain sense of optimism"

"Unlike in Germany, we see a certain sense of optimism among German companies abroad," Treier noted. "Companies are also grappling with challenging economic conditions at other locations, albeit with fewer structural challenges than at home. In some locations, they even benefit greatly from favourable investment conditions. However, they also face additional burdens, primarily due to the persistently high interest rates. This is particularly the case in the Eurozone and the USA," Treier analyzed. "The pronounced demand weakness in China as well as geopolitical risks are negatively affecting the businesses of globally operating German companies."

The business situation of the companies remains mediocre, but it varies by region. While companies in Europe currently report a relatively good business situation, their expectations for future business are significantly more pessimistic. The weakening German economy and structural challenges such as a shortage of skilled workers and high bureaucracy are weighing on the mood of companies on the continent. In contrast, companies at their North American locations consistently express optimism, with positive business conditions and even improved expectations. In the Asia-Pacific region (excluding Greater China) and in South and Central America, companies are very optimistic about their business development.

Hopes not fulfilled in China

In China, hopes for a recovery of demand after the end of the Zero-Covid policy have not been confirmed yet. Currently, companies there report predominantly poor business performance, and their expectations for the coming months are also subdued, especially due to anticipated weaker consumption.

Globally, low demand is the central business risk for companies, with 46 percent of mentions. Risks related to restrictive monetary policies, such as fluctuating exchange rates and financing challenges, have also slightly increased and pose significant risks. Supply-side constraints such as supply chain disruptions and high energy and commodity prices have receded into the background.

Willingness to invest internationally significantly higher than at home

Despite global crises and significant structural problems at home, German companies operating abroad are expanding their investments there. One-third of companies (33 percent) plan to increase their investments in the next twelve months (compared to 36 percent in spring), while one-fifth (20 percent) plan to reduce their investments (compared to 17 percent in spring). Particularly in North America, the MENA region, and the Asia-Pacific region (excluding Greater China), companies are planning higher investment budgets.

However, companies in Europe and China are more cautious. The global investment intentions of companies are significantly different from those in Germany. According to the recently published DIHK Economic Survey, in the next twelve months, more companies plan to reduce their investments domestically than to expand them. "This disparity between domestic and foreign investments once again shows that companies in Germany urgently need reliable and attractive conditions," Treier emphasizes.

While the market size and market entry are the main reasons for investments at their international locations for over half of the companies (55 percent), proximity to customers and localization (35 percent) also play an important role for a significant portion of companies in their foreign investments. Diversification (18 percent) and investment incentives (16 percent) are also recognized as important factors in foreign investments for some companies.

Positive sentiment in the Asia-Pacific region

German companies face challenges, but they are determined to expand their international activities and seize opportunities in various markets. In the Asia-Pacific region, companies particularly recognize positive developments in India, not least because the country benefits from the diversification intentions of companies: "The Indian economy is developing remarkably well. Our member companies are very optimistic and have significant investment plans for the coming years," says Stefan Halusa, Director General of the Indo-German Chamber of Commerce. "Even though the Indian market is not easy, companies see many opportunities here due to robust economic growth and high government investments in physical and digital infrastructure, and they are significantly expanding their engagement here."

Countries with "fiscal fat" have an advantage

In summary, DIHK expects below-average global economic growth of 2.5 percent for 2024 (average of the last 20 years: plus 3.6 percent). The German economy will only benefit marginally from this, with German exports expected to increase by a meager 1 percent in 2024, following a 0.5 percent decline in 2023. DIHK's Chief Executive of Foreign Trade, Treier, commented, "Now it is becoming evident that countries that have accumulated 'fiscal fat' during the past three decades of relatively smooth globalization can still create investment incentives during meager times."

You can download the complete survey here:

AHK World Business Outlook Fall 2023 (PDF, 987 KB)