Business in Germany – October 2023
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October 2023
Dear Reader, The economic outlook for Germany is ambiguous. After two consecutive quarters of declining gross domestic product (GDP), this trend came to a halt in the second quarter this year (0.0% compared with Q1/2023 – adjusted for price, seasonal and calendar effects). Compared to the second quarter of the previous year, Germany’s GDP fell by -0.6%. An economic contraction for the whole year seems likely now and is forecast by most researchers. Due to base effects, inflation fell to 4.5% in September from 6.1% in August. Price increases of below 3% are predicted for 2024. In July 2023, German exports were down 0.9% from June 2023 but imports rose by 1.4%. Year-on-year exports fell by 1.0% and imports by 10.2%. These figures show that the risk of recession is still clouding Germany’s economic prospects. The current instable geopolitical environment does certainly contribute to that forecast. Our regularly updated website „Resilience in times of decoupling resp. derisiking and geopolitical crisis” provides guidance how companies can respond to those risks. The attractiveness of Germany as a business location not only depends on its image as a "safe haven" for investors, but also relies on its digital infrastructure and technology. The use of generative AI models represents opportunities for companies and economies to secure their attractiveness in the long term, as the 2023 KPMG generative AI survey shows in which US executives were asked. Especially the finance function of German corporations is expected to become the central playground for the digital transformation. According to our new survey undertaken in Germany, 70% of German companies now place more emphasis on data-based decision-making processes. Last but not least, cloud use has become the new norm in German companies: According to the KPMG Cloud Monitor 2023, 97 percent of German companies depend on cloud solutions.