“Germany’s economy has recovered better than expected”
Foreign direct investment has increased – is this a turnaround or merely a modest recovery? Economist Samina Sultan puts the figures into context.
Interview: Helen Sibum Dr Sultan, your calculations show that foreign direct investment in Germany rose by 50 per cent in 2025 compared with 2024. Is Germany becoming more attractive again?
To put this into perspective, it’s important to note that foreign direct investment data can fluctuate considerably, for example as a result of individual large-scale projects. That’s why we also compared the figure with the median for the years 2015 to 2024: even then, the increase is still 11 per cent. So this more robust comparison also shows a positive trend.
Investment from the UK increased, while US investment declined. What are the reasons for this?
The sharp rise in investment from the UK is probably due to a major investment in the pharmaceutical company Stada. In the case of the USA, we can assume that – mirroring the decline in German investment there – there is a degree of caution because of the uncertain environment for transatlantic economic relations. Another important finding is that most foreign investment in Germany still comes from European countries.
What advantages as a business location are currently particularly attractive to international companies?
In Germany, we tend to focus on the negative aspects, such as high energy prices. But we still have highly successful companies here that make Germany an attractive location for acquisitions. We also continue to have a good education and vocational training system across the board. Germany’s political and legal stability is another advantage, even if recent voting patterns in some regions have raised some questions about this.
The increase in investment was one of several positive pieces of economic news recently. Do you see an overall picture emerging from this?
Many research institutes have revised their economic growth forecasts upwards this year, and we’ve seen positive signals from the economy as a whole in the first half of the year. I wouldn’t read too much into this, but the economy has recovered better than might have been expected given the geopolitical situation.
Dr Samina Sultan is Senior Economist for European Economic Policy and Foreign Trade at the German Economic Institute (IW) in Cologne.
