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KfW Research

Germany's strong link to the global economy

The external economic environment has become more difficult in recent years. The process of globalisation, from which Germany has benefited greatly since the 1990s, has slowed down in the last ten years. The globally integrated German economy will continue to feel the effects of the Corona crisis and the trade conflicts with the center USA as well as the global investment and productivity weaknesses. Russia's attack on Ukraine leads to new uncertainties. This also affects the SMEs, which is active abroad both directly and indirectly via its exporting customers. How well equipped are the German economy and SMEs for the global challenges? How can we strengthen the role of Germany and Europe in the world? How can the benefits of international trade and cooperation be advanced and made available to all? These are some of the questions that concern us in this context.

Here is an overview of current KfW Research publications on this topic:

Set in stone? The German economy’s dependency on copper, lithium and rare earths

The future-proof positioning of Germany's supply of mineral raw materials is key to safeguarding the country’s viability as a business location, also in view of rising minerals demand for use in future technologies. A study commissioned by KfW Research and compiled by IW Consult and Fraunhofer ISI analyses the raw material-related value added for the raw materials copper, lithium and rare earths. (March 2024)

Main motive for SMEs to invest abroad is to expand into new sales markets

Around 3.8% of small and medium-sized enterprises in Germany plan to invest abroad in the coming years, roughly as many as before the COVID-19 pandemic. Even if a growing offshoring trend is not to be expected, risks to Germany’s competitiveness are emerging that need to be addressed. (December 2023).

KfW Internationalisation Report 2023 – Many SMEs currently perform better than their foreign competitors but see need for action to secure their future competitiveness

German SMEs currently see themselves as being well-positioned in international competition in many respects. The majority of businesses are also optimistic about their future competitive position but they see a clear need for action. (July 2023).

Shocks, dependencies and trends – considerations on international production networks

Global value chains play a role in the business cycle comovements between countries, in transmitting and mitigating economic supply and demand shocks, in enabling economies to recover and in generating profits from trade. (April 2023).

Germany’s close integration into global trade and value chains

The changes in the external economic environment resulting from the coronavirus crisis of 2020 and the impact of the war in Ukraine in 2022 make it necessary to take stock of Germany’s linkages in trade and value chains. (December 2022).

KfW Internationalisation Report 2022 – SMEs are suffering from global supply bottlenecks

The war in Ukraine is causing new disruptions in global value chains. Also for SMEs, supply bottlenecks remain a burden. Yet, not only supply chain disruptions pose a risk to the further recovery of SMEs' foreign business -– which plummeted during the Corona crisis. (May 2022).

China’s long-term development goals: a challenge to productivity

Doubling its economic output by 2035 is China's more ambitious development goal, compared to achieving high-income country status by 2025. If the innovation strategy is successful, international competition in high-value and cutting-edge technology goods is likely to become stronger for Germany as well. (January 2022).

What’s next for Germany’s growth model? Scenarios for globalisation

The effects of globalisation on the German economy up to 2030 are analyzed in a study carried out by Prognos using three scenarios. A renewed surge of globalisation represents the best scenario, deglobalisation the worst. In between, the slowed globalisation ranks. (October 2021)

Low globalisation momentum requires adjustment of German companies’ growth strategies

When globalisation slows down, German companies are asked to review their export strategies. A Prognos study identifies adaptation options: a stronger focus on the domestic market, the development of new, innovative export products and the opening up of new export markets in emerging and developing countries. (October 2021)

KfW Internationalisation Report 2021

The coronavirus crisis has sent SMEs’ international business tumbling. In future, SMEs want to focus more strongly on the domestic market or diversify their exports more. But their willingness to give up efficiency in return for more resilient value chains is limited. (May 2021)

The coronavirus and foreign trade – the crisis accentuates long-term trends

International trade continues to play an important role for Germany's economic model. The Corona crisis caused a sharp drop in capital goods trade in particular. In the longer term, digitalisation and the transition to a climate-neutral economy are important topics for international trade. (March 2021)

Pragmatism in trade policy: regional trade agreements

The economic recovery from the coronavirus crisis will hinge on meeting three immediate challenges: managing increased business debt and its consequences, building on the initial impetus for digitalisation and advancing carbon neutrality. (August 2020)

The coronavirus crisis and international value chains

International trade collapsed during the Corona crisis. The crisis experience is likely to prompt many businesses to review and adapt their global value chains. As a result, globalisation could lose further momentum. (December 2020)

For crisis-resilient growth and better global collaboration

The global response to the coronavirus pandemic has plunged Germany into a deep recession. This discussion paper describes what we now need to do in Germany to succeed in overcoming the crisis and strengthening environmentally sound growth on a sustainable basis. (October 2020)

Uncertainty and economic activity in Germany

The global spread of COVID-19 and the response to the pandemic have led to a rapid rise in uncertainty, which has a negative impact on economic activity. Measuring uncertainty, however, is a challenge. (September 2020)

How effectively do Germany’s foreign trade promotion support investment in Africa?

Will economic relations between Germany and Poland thrive post-coronavirus?

German-Polish economic relations have developed extremely well. Now, however, the coronavirus crisis is calling into question established structures of cooperation, particularly in the border regions. A more intensive dialogue is now required to jointly overcome the current challenges. (July 2020)

KfW Internationalisation Report 2020: German SMEs' foreign trade

The coronavirus crisis has hit the export-oriented German economy in what was already a difficult situation. Tensions in international trade relations and a worsening global economy also affected SMEs, whose international turnover grew by a mere 3.1% in 2018. (April 2020)

Export weakness under the microscope: Where are the headwinds in the euro area coming from?

Difficult international conditions are putting constant pressure on global trade. This is not just afflicting Europe’s exporters but also causing a noticeable slowdown in economic activity in the euro area. (February 2020)

April 2023

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