Companies are once again seeing the odd ray of light for the global economy
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German companies are more positive about the future at their international locations than they were in autumn 2023 – but with very subdued optimism. This is shown by the current AHK World Business Outlook.
Volker Treier
© DIHK / Werner Schuering
For the survey, the German Chamber of Industry and Commerce (DIHK) and the German Chambers of Commerce Abroad (AHK) analyzed feedback from nearly 4,300 globally active AHK member companies.
According to the findings, nearly a third (31 percent) of them expect an economic upturn at their locations in the current year. In autumn 2023, it was only 22 percent. However, one in every five companies (19 percent) still anticipate an economic downturn, down from 28 percent in autumn.
Declining inflation rates, coupled with hopes for interest rate cuts, are improving companies' economic expectations. However, ongoing geopolitical tensions and trade conflicts are dampening confidence.
As a result, expectations for their own business development are only marginally increasing. "The signs point to an upswing in many global markets. This gives many companies hope for a better mood again," commented Volker Treier, Chief Foreign Trade Officer of the DIHK, on the results of the AHK World Business Outlook Spring 2024. "Currently, the improved economic expectations are not yet materializing in an equally strong revival of international trade – and thus also of the business of German companies on site."
The sluggish economy in Germany and existing uncertainties about economic policy development continue to hinder many AHK member companies from regaining momentum and forging concrete investment plans, Treier regrets. "Skepticism and uncertainty thus persist."
From a global perspective, the business situation is hardly improving compared to the previous survey. It still remains below the level of the previous year 2023 and slightly below the long-term average. Business expectations are also only marginally increasing. Consequently, companies are also holding back on investments at their international locations.
In Europe, the brakes on economic growth and business conditions are only slowly releasing. Companies in the Eurozone do not assess their current situation any better than they did in the fall. Business expectations for the next twelve months also remain below the global average and only slightly improve. Persistent skill shortages, low demand, rising labor costs, and uncertain economic policy conditions prevent a stronger upturn for Europe as a whole.
On the occasion of the 20th anniversary of the EU's eastern enlargement, a spotlight on the countries reveals that the business of German companies in Eastern Europe is slightly more clouded on average than in the rest of the EU. This is mainly due to the proximity to the ongoing war in Ukraine.
While the sentiment among companies at numerous international locations is at least slightly improving, expectations in China are once again clouding. The ongoing weakness in demand in the Chinese economy (80 percent see it as a business risk) is having a negative impact.
Maximilian Butek, Delegate of the German Economy for the Delegation in Shanghai, explains: "German products remain the most powerful in terms of quality, technological leadership, and innovation. However, increasing competitive disadvantages compared to Chinese competitors, especially regarding market access, government contacts, or obtaining information for public tenders, pose challenges for German companies. This means that currently, one must be able to afford doing business in China and requires patience."
While companies at their locations in Asia-Pacific (excluding Greater China) are more optimistic and significantly raise their business expectations. The region is developing dynamically and remains an important destination for diversifying supply chains. "The German economy is particularly dependent on certain key productions and trading partners," explains Volker Treier. "Here, we must broaden our procurement sources and sales markets more than before. Risks must be better diversified. The goal is to build resilience in procurement."
Companies also see further bright spots, particularly in the United States and the MENA region. With a globally above-average business situation and business expectations, there, the generally growing confidence in global economic development is reflected. Especially in the MENA region, companies are more optimistic compared to the previous survey.
Favorable conditions in Morocco, an easing of the liquidity crisis in Egypt, and ongoing good investment opportunities in Saudi Arabia and the United Arab Emirates (UAE) contribute to the momentum in the region. Despite slightly slower economic growth and high interest rates lately, a robust private consumption and a stable job market have supported the US economy.
However, more frequently than in fall, companies in the USA are concerned about uncertain economic policy conditions and, above all, trade barriers. "This trend shows that the international business of German companies overall is not a given," Treier points out. "It is currently all the more necessary to work towards enhanced global cooperation and the promotion of market access, particularly in the bilateral sphere, to fully exploit the potential of German exports."
The current results of the AHK World Business Outlook illustrate that the signs are pointing towards a slight revival of the global economy. However, due to uncertainty and risks, companies are not yet able to sufficiently benefit from this. Therefore, the DIHK adjusts its export forecast for 2024.
After a decline of German exports by 1.8 percent in 2023, exports will at least reach a break-even point this year. DIHK Chief Foreign Trade Officer Treier states, "The weak development of German foreign trade at the turn of the year and the limited improvement in business expectations and investment intentions, despite some small bright spots, indicate a challenging year ahead." You can find the complete survey available for download here:
You can download the complete survey here:
AHK World Business Outlook Spring 2024 (PDF, 1 MB)
