In the pandemic year 2020, the Federal Government's export credit and investment guarantees have significantly contributed to supporting the German economy and saving jobs in Germany, thereby proving to be reliable and robust instruments of foreign trade and investment promotion. By setting up its 5-point package of measures aimed at boosting Germany’s export industry, the Federal Ministry for Economic Affairs and Energy had improved the conditions for the use of export credit guarantees during the coronavirus crisis in July 2020 in order to improve the liquidity situation of exporters and importers in the current difficult situation.
Export credit guarantees of the Federal Government (Hermes insurance):
In 2020, the Federal Government provided export credit guarantees worth around €16.7 billion. In 2019, the figure was €21 billion, with the decrease being due not least to the COVID-19 pandemic. The continued high volume of cover for 2020 only serves to highlight the importance of this Federal Government hedging instrument for Germany’s export industry. It also shows that the expanded risk-assumption and improved conditions for insurance against risks granted during the coronavirus crisis are being well received by industry. A good 80% of the transactions covered by export credit guarantees concern exports to developing and emerging countries.
The economic development in the target markets for the German export industry remains rather challenging. As a result of the COVID-19 pandemic, many investment projects in foreign markets were postponed, resulting in many export deals not having been able to be realised (yet).
In a quest to support the export industry and its employees during the pandemic, the Federal Ministry for Economic Affairs and Energy launched a 5-point package of measures in July 2020 to make it easier for exporters and banks financing exports to hedge business deals with export credit guarantees during the crisis. When assessing the risk of a particular transaction, the Federal Government takes into account, for example, the economic and financial situation of the foreign debtor prior to the outbreak of the crisis and the stability of its business model.
Investment guarantees granted by the Federal Government:
In 2020, the Federal Republic of Germany provided investment guarantees worth €0.9 billion for projects in 13 countries. The bulk of the new guarantee volume was granted to projects in Asia (primarily China and India). Once again, about one third of the approved applications were submitted by small and medium-sized enterprises. Against a backdrop of significantly decreased direct investments worldwide, the volume of newly granted investment guarantees in 2020 decreased by about two thirds compared to the previous year.
At the same time, however, the volume of new applications (€7.0 billion) nearly doubled compared to the previous year, making it the highest figure in the last five years. At the end of the year, the volume of investment guarantees granted stood at €27.6 billion.
At the end of 2020, the Federal Government decided to give stronger support to climate-friendly investments in renewable energy projects. In terms of investment guarantees, this support is provided through comprehensive coverage of payment risks from power purchase agreements within the framework of the ‘breach-of-contract coverage’.
Throughout the globe, political risks continue to have a noticeable impact, especially for investors. In 2020, the Federal Government therefore again committed to insuring investment projects to a considerable extent in order to mitigate political risks and to enable foreign projects to be continued.
The 2020 Annual Reports on the Export Credit Guarantees and Investment Guarantees of the Federal Republic of Germany will be published on the website of the Federal Ministry for Economic Affairs and Energy in spring. Further information on export credit and investment guarantees can be found at (in German) and (in German).