Faltering FDI inflows and a number of project postponements are adding to the precarious economic outlook in Germany. 

According to preliminary figures from fDi Markets, a greenfield investment monitor, foreign investors announced only 305 projects worth an estimated $16.7bn in Germany between January and August 2024. This pales in comparison to the 776 projects and $43.3bn secured during the same period in 2023.

While the number of announced greenfield FDI projects recorded in the first eight months of the year is the lowest since the same period in 2007, capex intensity remained high, in line with the strong levels of the 2021–2023 period, fDi Markets figures show. 

The country’s flagging FDI performance provides another indication of its economic slowdown. After contracting by 0.3% in 2023, GDP is expected to shrink again by 0.2% in 2024, according to forecasts released by the ministry for economic affairs and climate action, which originally expected the GDP to grow marginally by 0.2% this year.

Dr Christian Rusche, senior economist for competition and structural change at the German Economic Institute, tells fDi that “the recent reduction in growth projections is just the consequence of structural problems in Germany”.

He adds that the same “structural problems are… also responsible for the decline in FDI”.

The weak FDI sentiment of 2024 has been exacerbated by a spate of project postponements, which have compromised the outlook of projects that were announced in previous years and, in turn, their capacity to contribute to growth and development. Troubles are affecting two sectors in particular: semiconductors and automotive. 

US firm Intel previously announced a €30bn semiconductor site for Magdeburg but opted to pause the investment in September 2024, holding off on the groundbreaking process until at least 2026. The company is pumping the brakes on its global investment campaign and said it will pause its project in Germany and another one in Poland by approximately two years “based on anticipated market demand”, CEO Pat Gelsinger said in a note on September 16. 

Wolfspeed, another US semiconductor manufacturer, halted its proposed $3bn plant in Saarland, pushing construction back to mid-2025 at the earliest.

These semiconductor postponements are a blow to the German government, which developed an $11.4bn incentives package for Intel in 2022 and more generally has provided an average of $1.53bn of incentives per semiconductor project between 2010 and 2024, according to IncentivesFlow.

In response to the Intel announcement, German finance minister Christian Lindner said: “All funds not required for Intel must be reserved in the federal budget to reduce unresolved financial issues.” This view is complicated by sources close to minister for economic affairs and climate action Robert Habeck, who say the Intel funds can’t be redirected for federal use.

The battery sector is also experiencing trouble, because foreign firms ranging from Northvolt to Stellantis have been forced to put the brakes on German factories intended to serve the electric vehicle (EV) transition.

This is part of a wider FDI issue, in which an industry slowdown has led automotive companies to cancel or suspend six projects with battery partners worth a total of $13bn.

The EV transition is a factor in the travails of Volkswagen, which is seriously considering the closure of manufacturing facilities in Germany.

When outlining the new GDP projection for 2024, Mr Habeck acknowledged government discord over spending, stating: “Political debate in Germany… does not currently provide companies… with a clear compass as to where the journey is heading.”

Governmental strife is also being evident due to the success of populist parties like Alternative für Deutschland, because various analyses suggest these parties could dissuade investment, a pertinent thought in advance of the German federal elections in September 2025.