A recent study by the Institute for German Economy (IW), commissioned by the Bavarian Business Association (vbw), reveals a gradual decline in Bavaria’s attractiveness as an industrial location on the international stage While still ranking within the top 10 among 46 surveyed economies – securing ninth place and four positions ahead of Germany overall – the study highlights a significant erosion of Bavaria’s previously substantial lead
Bertram Brossardt, CEO of the vbw, noted that while Bavaria remains a competitive location, its position in international rankings has been considerably stronger in the past However, he cautioned that a methodological change impacts direct comparisons with previous studies The leading economies in the study include Switzerland, Denmark, Australia, Canada, Sweden, Ireland, the United States and Finland
The study identified a particularly concerning trend in the dynamism ranking, where Bavaria placed 44th, falling even behind Germany’s overall ranking of 41st This signifies that competitor nations are demonstrating faster improvements in attractive location conditions, diminishing Bavaria’s advantage Notably, rapidly developing economies like India, Vietnam, China and Indonesia dominated the top ten positions of the dynamism ranking, indicating a marked “catch-up” effect by emerging markets while highlighting the challenges faced by developed economies like Germany and Bavaria in maintaining momentum
Brossardt emphasized, “The advantages of Bavaria are dwindling” pointing to cost levels as a critical factor He cited disadvantages related to taxes, labor costs and energy expenses as significant contributors to the declining competitiveness and stressed the necessity for intervention, particularly from federal policymakers He acknowledged recent steps taken by the current German government and urged a continued commitment to economic improvements
The study did highlight several areas of Bavarian strength The region excels in economic diversification and complexity, in market size, value chain structure and market openness, achieving the top ranking in these categories Bavaria also demonstrates a strong knowledge-based economy, placing third in that domain However, the cost factor remains a significant weakness, placing Bavaria near the bottom of the rankings
Brossardt reiterated the need for “lower costs and less bureaucracy” to enable crucial investments required to maintain international competitiveness He specifically pointed to energy and supplementary labor costs – issues largely influenced by federal legislation – as detrimental to Bavaria’s ranking and expressed hope that the new German government would provide necessary relief