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Doing business in Germany: the most important strengths and weaknesses

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low risk for businesses

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financial risk

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financial risk

Germany is Europe's largest economy and one of the world's biggest. In the past, the country was known as the engine of the European economy, but this has certainly not been the case in recent years. Germany was in recession at a time when Europe's average growth rate was rising only slightly.

Nor is Germany in the lead for the years ahead. With expected economic growth of +0.4% in 2025 and +0.9% in 2026, Germany is the lantern of the Eurozone's leading economic countries. Although the recession is on its way out, according to our research department, it will take years for Germany to regain its economic health. This will require drastic measures.

The main pillars of the German economy are under pressure:

  • The export-oriented economy is increasingly confronted with protectionist measures implemented worldwide.
  • The importance of German engineering power is diminished by the growing importance of data and software.
  • Technological leadership has been eroded. Dominance is shifting to competitors such as China and the USA, who have a clear lead in artificial intelligence.
  • Germany's industrial strength is suffering from the costly energy transition.
  • Immigration, a possible solution to the demographic deficit (aging population, labor shortage), is fuelling political populism.

Skewed growth in industry versus the service sector

If we look at GDP, the share of industry in Germany is much more dominant than in other large countries, while the service sector lags behind. German industry contributes 18.5% to GDP (in France 9.3% and in the US 10.7%) and the service sector 62% (in France 70.3% in the US 77.6%). Germany lags behind with smart, digital services that generate a lot of money in other countries.

Labour force

Germany has a well-educated labour force. The country has a long history of craftsmanship and technical prowess. This makes German companies attractive to do business with. Quality is guaranteed and the companies are used to doing business internationally. The economy is largely geared to exports.

Central location in Europe

Germany is located in the heart of Europe, a strategically perfect location for companies wanting to do business within the European Union. The German infrastructure is excellent on a number of fronts. The country has an extensive and well-maintained road network, modern and efficient airports and also an important network of waterways. The German railway network is reliable and efficient, although there is also a lack of maintenance. The digital infrastructure is clearly less well developed than in other European countries.

Social partnership

Germany has a tradition of social partnership. Government, trade unions and employers' organisations work together to develop the economy. This ensures a stable economic climate.

Green energy

No country produces as much renewable energy as Germany. The German Energiewende is well known. Large-scale investments have been made in renewable energy sources such as solar energy, wind energy, biomass and hydropower. The aim is to reduce dependence on fossil fuels (as well as nuclear energy). The country has numerous subsidy programs to encourage energy efficiency. Exports also benefit from the leading role that Germany plays in the field of green energy. The growing global demand for green technologies offers German businesses plenty of (new) opportunities.
windenergie

Strengths and weaknesses

  • Solid public finances
  • Strong industrial base
  • Low structural unemployment
  • Well-diversified export sector (products and trading partners)
  • Low systemic political risk
  • Skewed growth in industry versus the service sector
  • Ageing population and skilled labour shortage
  • Dependence on exports
  • Behind in new technology
  • Dominance of the automotive sector
  • Moderate medium-term growth prospects due to weak investment

Import & Export 

Germany has benefited greatly from globalisation. And not just the large corporations whose brands can be found in all corners of the world. The smaller companies ('Mittelstand') also score well internationally. They often specialise in niche markets. The German export sector is highly competitive and well positioned to compete on the global market. The fact that the German government supports the export sector with various subsidy programs also plays a role in this.

Main countries for imports and exports are:

(% of total, 2023)

Export Position Import
United-States 9,9%
1
13.0% China
France 7,3%
2
7,6% Netherlands
Netherlands 6,8%
3
6,2% United-States
China 6,8%
4
5,2% Poland
Poland 5,7%
5
4,8% Italy

Main exported & imported products

Export

  1. Road Vehicles
  2. Machinery
  3. Electrical Products
  4. Pharmaceutical Products
  5. Optical, photographic Products

Import

  1. Electrical Products
  2. Machinery
  3. Road Vehicles
  4. Petroleum Products
  5. Pharmaceutical Products
export-germany

The German economy under the microscope

Despite the current negative trend, Germany remains an important economic bastion. The impact of the German economy has diminished, but remains very significant. The country is still one of the most economically powerful in the world. It's not just the big groups like Mercedes-Benz, Siemens and Bosch that are important. It's precisely the strength of Germany's small and medium-sized enterprises that is also extremely strong. Germany has over 3 million SMEs, which account for over 50% of employment.

What are the implications for Belgian companies?

Of course, Belgian companies are suffering from the slowdown in the German economy. Germany remains our main sales market (almost 20% of Belgian exports go to Germany). Germany is also (after the Netherlands) our main importing country. Despite Germany's problems, the country remains crucial due to its intensive trade, geographical proximity and cooperation in various sectors.

For you as an entrepreneur, the German market remains very attractive. However, a word of caution is in order. The current wave of business bankruptcies makes doing business in Germany more uncertain.

Doing business in Germany: what should you take into account?

In many ways, the Germans can be considered masters of planning and organisation. Companies have a well-defined and strictly enforced hierarchy, with clear responsibilities and distinctions between roles and departments. The meetings follow a formal procedure and punctuality is taken very seriously. Being 15 minutes late is considered a serious violation.

German companies are generally risk-averse, which slows down the decision-making process. You can expect that every detail of your proposal will be considered with care and attention to detail. Be well prepared and use facts and figures.

The communication style is formal, direct, short and precise. Emotions and unnecessary content have no place in a discussion. If you don't speak German, make sure you don't systematically address someone in English. Germans generally speak very good English, but some may feel offended.

Need help for you export plans to Germany?

If you want to do business in Germany, the country offers plenty of opportunities, although you must take numerous considerations into account when making decisions. What conditions do you apply to the agreements you make? You need thorough insight into markets, customers and local economic developments. And that is exactly where trade credit insurer Allianz Trade can help you.

With over 100 years of international expertise, we help you (further) develop your business abroad. We specifically focus on companies that do business internationally, including in Germany. We owe our unique knowledge of the local market to our extensive database of financial data and the expertise of our analysts. With our offices and colleagues in Germany we will provide you with the necessary expertise to securely develop your business in Germany.