The Russian invasion of Ukraine has significantly clouded the economic outlook in Germany and worsened the investment climate. The investment gap created in the wake of the Covid pandemic will not be closed for the time being.
Supply Chains, Cost and Investments in Times of Multiple Crises
German Economic Institute (IW)
The Russian invasion of Ukraine has significantly clouded the economic outlook in Germany and worsened the investment climate. The investment gap created in the wake of the Covid pandemic will not be closed for the time being.
This not only weighs on the pace of economic activity, but at the same time creates protracted deficits in the overall economic capital stock and the associated production and productivity potential. The business surveys conducted by the German Economic Institute in summer and autumn 2022 provide an empirical basis for explaining the current weakness in investment. On the one hand, this company data shows the influence of certain factors on general investment activity, which is unaffected by the Ukraine war. Digitalisation and decarbonisation have a positive impact on the level of investment. High labour costs, production problems due to a lack of supplies and, in particular, the prevailing global economic uncertainty, on the other hand, are weighing on the investment climate. Uncertainties regarding energy supply, a lack of employees and the level of energy costs are also dominant barriers to investment. Secondly, the companies were asked whether and how, in their view, these investment determinants are influenced by the war in Ukraine. While the few positive drivers of investment from the companies’ point of view have changed only little, there has been a massive deterioration especially in the already existing barriers to investment: the sharp rise in energy costs, uncertainties regarding energy supply, global uncertainties and disruptions.
Supply Chains, Cost and Investments in Times of Multiple Crises
German Economic Institute (IW)
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