Inward FDI in Germany and its policy context: Update 2011

During the 2009 worldwide financial and economic crisis, Germany kept its position as the fourth largest host economy for inward foreign direct investment (IFDI) among developed countries, although its IFDI stock measured in Euros decreased slightly due to valuation effects. IFDI flows strongly rose that year and further increased in 2010, reflecting the improved financial position of multinational enterprises (MNEs) operating in Germany and the strong economic upswing of the German economy at that time. In the first half of 2011, IFDI flows were low, as foreign parent companies sharply cut intra-company lending to their German affiliates. Economic reforms in recent years have further improved the attractiveness of Germany as a business location, reflected in excellent international competitiveness rankings. But, the ongoing European debt crisis and the economic slowdown of the European economy could dampen IFDI in the second half of 2011 and in 2012