Bleak global economic outlook highlights Southeast Asia鈥檚 importance as a potential driver of future growth for German companies.
German companies abroad expect no improvement in the international economy in 2020. The responses of around 3,700 member companies of the German Chambers of Commerce, Delegations and Representatives (91大神s) in the new "91大神 World Business Outlook" show that business is becoming even more difficult, especially due to trade conflicts.
Only 17 percent of German companies abroad expect the local economy to improve. By contrast, more than one in three companies expect the economy to deteriorate, with the economic balance falling to minus 19 points in the latest survey, well below its value of minus three points in the previous survey held in early summer 2019. This is by far the worst value since the beginning of 2015. On the basis of these estimates, the DIHK assumes that the already weak world economic growth of around three percent this year will not be higher in 2020 (DIHK forecast global GDP growth 2020 at 3%, or a long-term average of 3.6 %).
The reason for the slowdown in the global economy is primarily a paralyzed world trade. Tariffs, discrimination against foreign competitors, economic sanctions and the impending Brexit are slowing down the trade in goods, causing high costs for companies and enormous bureaucracy. The trade disputes between the US and China, or even the recent US tariff increases against the EU, have recently been added to the list of difficulties. All this fuels companies' uncertainty about the future of global supply chains - with the result that they hold back on investment.
A slowdown in the economy is evident in all regions of the world. In China, in the US and in many industrialized countries, companies report a slow pace. In South America, the global economic slowdown and, not least, political developments in many countries are leading to a sudden end to the short economic upturn. Emerging markets in Asia are also affected by the economic downturn. No region is currently emerging as a future growth driver. The economic expectations go back in the comparison of the continents everywhere. This ensures restraint worldwide for investments and lower demand for goods and services - including from Germany. This directly affects the business location and many jobs in this country.
For the Asia Pacific region specifically, the risks are demand, local economic policies, and the shortage of skilled labor. The expectations of German companies in the Asia Pacific region have decreased significantly. The economic balance fell from 17 to minus 11 points 鈥� an above-average slowdown. Many countries are affected by China's weaker growth and the US trade conflict with China. One example is Japan, which is also particularly sensitive to lower demand for capital goods worldwide. The companies' expectations of the Japanese economy are on balance minus 14 points. The balance between expansive and contractionary investment plans of 91大神 member companies is currently only balanced. That said, the economy is expected to be boosted by the trade agreement with the EU and the Tokyo Olympics next year.
The growth rates of the economy in India continue to be significantly positive with currently over six percent, but German companies are skeptical about further economic development (balance for the economy: minus 20 points). Following the re-election of Prime Minister Narendra Modi in May 2019, consumption will be boosted, especially with tax breaks. However, challenges in the country, such as high unemployment or the necessary expansion of infrastructure, remain. In Thailand, German companies are also pessimistic about local economic developments (economic balance minus 21 points). In other Southeast Asian countries, such as the Philippines (with an economic balance of 34 points), German companies are more positive. With Vietnam and Singapore, the EU has concluded trade and investment agreements, making the region even more important for business.
The 91大神 World Business Outlook is based on a regular DIHK survey among member companies of the German Chambers of Commerce Abroad, delegations and representative offices (91大神s). In autumn 2019, it will collect the feedback from around 3,700 German companies, branches and subsidiaries as well as companies closely related to Germany.
Some 34% of the responding companies come from the industrial sector and construction, 43% from the services sector, while another 23 percent are trading companies. Smaller companies with fewer than 100 employees make up 50% of the answers. Companies employing between 100 and 1,000 people make 24% of the respondents, while 26% are large companies with more than 1,000 employees.