Country Trade Risk Index (ERI): 101.24
Country risk reference rating: level 2 (2/9)
Country Risk Outlook: Stable
Economic and trade risks
In 2012, Germany’s nominal GDP was 2,643.9 billion euros, per capita GDP was 32,374 euros, the real economic growth rate was 0.9%, and the inflation rate was 2.1%. After the financial crisis, thanks to the substantial growth in exports, the German economy emerged from the crisis faster than other euro zone countries. From 2010 to 2011, driven by fixed investment, Germany’s domestic demand regained its vitality and became the main driving force of economic growth. In 2011, real GDP grew by 3.1%. In 2012, under the influence of declining export demand and sluggish domestic industrial activity, Germany’s economic growth declined sharply, with GDP growing only 0.9% year-on-year. In particular, in the fourth quarter of 2012, real GDP fell sharply by 0.7% quarter-on-quarter. Entering 2013, tensions between Italy and Cyprus have resurfaced market tensions. Coupled with the uncertainty of the global economic outlook and the poor performance of the Eurozone economy, German economic activity has also started quite sluggishly, with a quarter-on-quarter growth of only 0.1% in the first quarter. It was down 0.3% year-on-year, but improved in the second quarter.
Investment risk
Germany is one of the most attractive countries for investment in the world. However, in recent years, Germany’s ranking has declined in the World Bank’s investment environment assessment. According to the World Bank’s 2013 Doing Business Report, Germany ranked 20th among 185 economies in the world, falling two places from the previous year. Germany ranks low when it comes to access to starting a business, registering property, investor protection and paying taxes. The main reason for Germany’s decline in ranking is the uncertainty of the economic development of the Eurozone and the European financial industry. In addition, the structural reforms carried out in response to the European debt crisis have also posed certain challenges to policy stability.
Governments at all levels in Germany have levied about 30 kinds of taxes. Although there are many tax items, they are focused. The main taxes are income tax and value-added tax, which account for about 30% and 40% of the total tax revenue in Germany.
Legal risks
Germany is one of the countries in the world with few restrictions on foreign investment access. The market access conditions for foreign investment are basically the same as those for domestic investment. The fields that German investors are allowed to enter generally do not have restrictions on foreign investment. There are no specific restrictions or regulations in German law regarding investment methods. You can invest in Germany through equity participation, mergers and acquisitions, etc. At the same time, Germany does not have any foreign exchange restrictions on foreign investment.
According to the standards of the World Bank’s Doing Business Report 2013, after a German company files for bankruptcy, the bankruptcy case trial and execution process takes 1.2 years, which is higher than the average level of OECD member countries.
Overall risk
Germany is a country with very low political risks among European countries. Germany’s multi-party democracy is mature, and party rotation and competition will not have a major impact on domestic political stability. Germany has a sound legal system, high-quality citizens, easing social conflicts, and generally good public security conditions. Although there are certain security threats, the risk of terrorist attacks is relatively low. After the financial crisis, the German economy emerged from the crisis faster than other euro zone countries, and domestic demand regained its vitality and became the main driving force for economic growth. The risks to the German economy in the future mainly come from the risk of further fermentation and spread of the European debt crisis and the possibility of the split of the euro zone. Germany is one of the most attractive countries for investment in the world and its position as a major provider and recipient of foreign direct investment has not changed. Germany has complete infrastructure, high political stability, high openness to trade and investment, and complete legal protection.
Based on the analysis and assessment of the current overall situation, Germany’s country trade risk index (ERI) is 101.24, the country risk reference rating is 2 (2/9), the country risk level is low, and the country risk outlook is stable. (Issuing agency: China Export and Credit Insurance Corporation)
