German and Italian multinational companies will double their foreign direct investments by 2030. This was written by Unicredit in a research published today, specifying that German companies will invest an additional 1.200 billion euros abroad, while for Italian companies the figure is 500 billion euros . The Eurozone and the United States will remain the main investment destinations.
According to the findings of the study, an increasing number of European companies will do business abroad through foreign direct investment (FDI). Global FDI growth has in fact far exceeded trading volume worldwide. The German and Italian multinationals (IMNs) are among the first operators worldwide. With a stock of foreign direct investments equal to approximately 1.600 trillion dollars, Germany is in third place after the United States (6.300 trillion) and the United Kingdom (1.600 trillion). The FDI of Italian companies stands at 550 billion dollars, while for the Austrians the amount invested is 220 billion.
“European companies – commented Gianni Franco Papa, Head of UniCredit Corporate & Investment Banking – have been at the forefront of this development and have steadily increased direct investment abroad over the years since the early 90s. For this reason we are strengthening our international network, with the intention of offering our clients the best possible financial advisory and services solutions to support their international growth”.
For foreign direct investment by both German and Italian multinationals, the eurozone and the United States will remain the most important destinations. FDI in China will grow at a good pace, but without yet playing a leading role. The foreign investment activities of Austrian companies will more than triple. Among the Top-10 destinations will be European countries, with a strong focus on CEE countries.
According to UniCredit data, German companies will invest abroad a further 1.200 billion euros between 2016 and 2030, therefore the stock of FDI abroad will almost double over the next 15 years. The main destination countries will remain those of the euro area with 420 billion euros, followed by the United States with around 200 billion euros. The industrialized countries will still remain among the most important destinations in absolute terms (given the highest base to date) compared to China, which will receive an additional 75 billion euros.
Even assuming a deglobalization scenario, German companies will still invest 500 billion euros abroad. Italian companies too will double their stock of foreign FDI from about 500 billion euros (based on current exchange rates) to 1.000 billion euros by 2030. As in the case of Germany, the area towards which the the largest capital will remain the Eurozone with a further 180 billion euros, followed by the United States (120 billion euros) and China (nearly 50 billion euros).
Even assuming an adverse scenario, foreign investment activities could still grow by 200 billion euros. Austrian multinationals will invest abroad by a further 500 billion euros by 2030, consequently the stock of FDI abroad will more than triple, even surpassing developments in Germany and Italy (in terms of growth). Among the Top-10 destinations will be European countries. In total, Austrian companies will invest 180 billion euros in the eurozone, almost half of which in Germany.
Other relevant CEE countries by destination will be: Slovakia, Romania, the Czech Republic and Hungary. In a risk scenario, Austrian multinationals would still need to expand their foreign assets by 170 billion euros. According to the UniCredit study, 47% of German industrial realities are planning investments abroad for 2016, a percentage that represents the highest level since the mid-90s.
A similar picture emerges for Italy. These plans are dominated by so-called horizontal motivations, ie linked to the control of outlet markets, while the importance of cost savings has decreased considerably in the last ten years.
“From an empirical point of view – write Harm Bandholz, Andreas Rees and Thomas Strobel, UniCredit economists and authors of the study state –, it is undeniable that FDI has been increasing less vigorously since the collapse of Lehman in 2008. Both companies that consumers are in the process of rebuilding their balance sheets. As a result, investment spending in general has remained quite subdued in recent years. As soon as these cyclical turmoil subsides, FDI activity will pick up with new momentum”.
Furthermore, “in recent years, a structural change has begun in the world economy with respect to services. Traditionally, it is believed that large companies do more business abroad than small and medium-sized enterprises. The implementation of new technologies can reduce the fixed and variable costs of international transactions and also allow SMEs to do more such transactions. Further support for global FDI activity can come from investment policy measures. In contrast to often heard arguments, they continued to be directed towards investment liberalization and promotion processes”.
