KPMG Business in Germany - December 2022

Dear Reader, the year 2022 is about to end. It was a year starting with a lot of optimism and hope. At the beginning of the year it seemed that the availability of effective vaccines against COVID and the fast recovery of the Chinese industry would pave the way for a successful recovery of the global economy. But then in February Russia invaded Ukraine and brought the war and incredible human suffering to Europe. It also disclosed Europe´s dependency on energy and certain raw materials from Russia, caused severe energy shortages and sky-rocketing energy prices. Depressingly, more than nine months later an end of the war is still not in sight. The Chinese-Russian partnership, the ongoing lockdowns and restrictions in China as well as China´s threats against Taiwan revealed that there is an even bigger threat to the global economy than Russia: Specifically the German industry is dependent on China as a supplier of critical raw materials, pe-products and all kind of supplies - including pharmaceuticals - and as a sales market. Nowadays resilience by way of diversification and regionalization of the whole value chain as well as more sustainable growth have risen as business objectives whereas short-term maximizing of profits by sourcing from the cheapest supplier globally, single sourcing and just-in time deliveries are definitely out. Up until now, Germany has been able to avoid a recession but the outlook for 2023 is rather pessimistic: the GDP forecast for 2023 published by the Federal Statistical Office expects a reduction of about -0,5% and real estate prices to fall significantly whereas the inflation rate in the Eurozone will remain above 6% in 2023 after having peaked in the first quarter of 2023. To respond to all those turbulences we decided to hold an hybrid International Business Summit in Germany this November to discuss with renowned industry and policy experts about the

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