German firms express confidence in Sri Lanka despite global economic headwinds

• Spring 2025 AHK Business Barometer reveals 54% German-affiliated firms rate their current situation as “good”; none report negative outlook
• Notes 66% expect improved business conditions over next year, while 32% foresee stability with only one company anticipating decline
• Indicates 33% plan to increase local investments, and 31% intend to expand their workforce
• Survey contrasts with pessimism in Germany, where businesses face weak demand, low exports and rising labour costs
• Firms cite shortage of skilled labour (47%), followed by weak domestic demand (26%) and unfavourable financing (25%) as key concerns
• 71% of companies say evolving US trade policy may negatively impact Sri Lankan operations
• Long-term concerns include global economic fragmentation, climate change, and supply chain sustainability

German companies operating in Sri Lanka have expressed a notably optimistic outlook for the year ahead, signalling confidence in the country’s economic prospects despite ongoing global economic headwinds according to the Spring 2025 AHK Business Barometer unveiled last week by the Delegation of German Industry and Commerce in Sri Lanka (AHK Sri Lanka).

The survey, based on responses from 54 German-affiliated businesses in Sri Lanka, revealed that 54% rated their current situation as "good," with none reporting a negative outlook. 

Looking forward, 66% of respondents expect business conditions to improve over the next 12 months, while 32% anticipate stability, leaving only one company predicting a decline in business performance.

The findings presented by AHK Sri Lanka Chief Delegate Martin Klose at a high-level Breakfast Dialogue in Colombo, reflect a ‘cautiously optimistic’ sentiment among German firms despite ongoing global economic uncertainties.

Citing the survey, Klose said this positive sentiment stands stark contrast to the broader global scenario, particularly in Germany, where companies are grappling with shrinking GDP forecasts, weak demand and rising labour costs. 

He said as per the survey, at home, German firms are reporting declining exports and investments intentions, coupled with pessimism about job growth. However, the Sri Lankan context appears to challenge that trend. 

The survey reveals that 33% of German businesses plan to increase their local investments in the coming months, while 48% intend to maintain existing investment levels. On the employment front, 31% of companies reported plans to expand their workforce, with a further 63% aiming to retain their current employee numbers.

Klose opined that this trend points to a stable outlook for job creation within German-affiliated enterprises in the country. 

Nevertheless, companies remain alert to several structural challenges and the most commonly cited concern was the shortage of skilled labour, flagged by 47% of respondents. Other concerns include weak domestic demand (26%), unfavourable financing conditions (25%) and rising labour costs, challenges that mirror issues in other emerging markets.

External geopolitical dynamics also weigh on German firms’ considerations. A sizeable 71% of respondents believe the evolving US trade policy will negatively affect their operations in Sri Lanka though the severity of that impact varies. 

Meanwhile, the long-term concerns include the fragmentation of the global economy, climate change, supply chain diversification and the transition toward sustainable energy production methods. 

The survey also provides a snapshot of the companies involved; nearly half are in the trade sector, with the remainder split between manufacturing/construction and services. About 70% are direct subsidiaries or branches of German companies and 39% are large firms employing over 1,000 people globally.

The presentation was followed by a panel discussion featuring B. Braun Lanka Managing

Director Dr. Nathalie de Dieuleveult and Allianz Insurance Lanka CEO Prashant Grover who shared valuable perspectives on navigating economic challenges, managing workforce dynamics, and aligning business strategies with global shifts such as climate change and trade policy risks. The event brought together key figures from the business community and industry stakeholders for an exchange of insights into the current economic landscape and expectations for the future. (CdeS)

- Pix by Ruwan Walpola