Foreign investment in Germany steady in tough environment

The financial district is photographed on early evening in Frankfurt

BERLIN (Reuters) -Foreign investment in Germany was stable in 2022, data from Germany Trade & Invest (GTAI), showed on Monday, although the body's head said it could be a challenge to retain investment from the biggest spender the United States.

Last year, Germany attracted 1,783 new projects and expansions, 23 fewer than in 2021, but 101 more than in 2020, the economic development agency said.

"Given the adverse circumstances, with the war in Ukraine, the energy crisis and the pandemic aftermath, this is a success," GTAI managing director Robert Hermann told Reuters on Monday.

However, the U.S. Inflation Reduction Act (IRA), introduced last year, offers subsidies for manufacturers based in North America that is luring companies away from Europe.

"We assume that the IRA will have an impact on the investment conditions in Europe and therefore also in Germany, but that wasn’t yet the case in 2022," Hermann said.

Germany's top investor in 2022, the United States accounted for 279 projects.

The value of announced investments rose to 25 billion euros ($27.52 billion) in 2022 - a 261% year-on-year increase - chiefly because U.S. semiconductor manufacturer Intel picked Germany for a new chip-making complex, with initial spending of 17 billion euros.

Excluding the Intel investment, announced investments totalled 8 billion euros, exceeding the 2021 result by one billion. Apart from semiconductors, foreign direct investment went into clean energy, digitalisation, logistics and the service sector, the GTAI said.

Switzerland was the second biggest investor with 208 projects and the United Kingdom the third with 170.

Neither country is in the European Union, but Hermann said they wanted "a supporting leg there" and had chosen Germany.

"Companies from all over the world appreciate Germany's market size, secure legal framework, highly qualified workforce, infrastructure and research and development environment," Hermann said.

China took fourth place with 141 projects, the lowest since 2014.

Hermann blamed China's strict COVID-19 policy which meant business trips could not take place.

Separate figures earlier this month showed German business hopes for a revival of trade with China following the end of COVID measures had yet to happen.

($1 = 0.9084 euros)

(Reporting by Maria Martinez and Rene Wagner; Editing by Emelia Sithole-Matarise and Barbara Lewis)