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Germany top destination for foreign investment

Despite a drop in foreign investment worldwide Germany has managed to attract more overseas money to domestic projects, according to Wirtschaftswoche magazine.

Germany top destination for foreign investment
Photo: DPA

Düsseldorf was the most popular destination for foreign investors in Germany, followed by Berlin and Frankfurt.

Düsseldorf was ranked 13th worldwide on the list of top cities attracting foreign investments with a 256 percent increase, supported by large investments from international telecommunications firms like Vodafone, Ericsson and the Chinese company ZTE.

The data, which compared 2011 levels to 2010, showed a 77 percent increase in foreign investment in Germany resulting from 600 projects that created 26,000 new jobs.

Germany bucked the worldwide trend, where the economic and financial crises made investors much less likely to fund overseas projects. Worldwide foreign investment dropped eight percent in 2011 over the previous year.

Developing countries were hardest hit by the decline, with foreign investment down 21 percent in India, three percent in Brazil, 13 percent in Russia and 15 percent in China. Uncertain economic conditions were behind the decline, the study said.

Germany was able to profit from a trend for foreigners to fund smaller rather than large projects, especially in the consumer sector. Mature markets in which consumers have a strong buying power, as in Germany, were the winners. Foreign investment in the retail and wholesale sector rose by 400 percent, compared to an international increase of 61 percent, the study said.

The Local/mw

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ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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