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ePaper created 2015-04-21, 16:47:46 | version 1.37.0
46 münchener Hypothekenbank eg | annual report 2014management report Outlook – Opportunities and Risks Economic development and financial markets The outlook for the global economy is mixed. On one hand, low oil prices, in particular, are likely to bolster the global economy. While on the other, prospects for growth in almost all of the major economic areas – with the exception of the USA – have weakened. According to the IMF, growth is being dampened by higher volatility in the financial markets, low inflation in the eurozone and Japan, the continuing decline in investments in China, as well as the economic downturn in the oil exporting nations, especially Russia, due to the drop in oil prices. Tensions between Russia and the Ukraine continue to cause uncertainty, along with concerns about the Middle East and threats posed by Islamic terrorist acts. These reasons led the IMF to cut its forecast for global economic growth by 0.3 percentage points at the start of 2015. The IMF currently anticipates that the global economy will only see a minor pick-up in growth in 2015 and expand by 3.5 percent followed by 3.7 percent in 2016. It is expected that the economic recovery in the eurozone is like- ly to continue its listless progress. The EU Commission predict- ed that the economy would grow by 1.3 percent in 2015 and 1.9 percent in 2016. Growth is being assisted, in particular, by the low price of oil as well as the weaker euro, which is support- ing the export economy. In contrast, the outlook is dampened by the unresolved structural problems in parts of the eurozone. Political developments are also expected have a major influence on the economy as parliamentary elections are scheduled to be held in numerous countries in southern Europe. The January elections in Greece put populist parties in power which ques- tioned previous reform efforts. The results of the parliamentary elections this fall in Spain and Portugal could also have an im- pact on the reform measures in these countries. Germany will be able to continue the comparatively dynamic growth of its economy seen in the fourth quarter of 2014 into the new year. The export economy will be strengthened by the low price of oil, the weaker euro and favourable interest rates. The domestic economy will benefit from further improvements in the job market and significant gains in the personal income level, which is also a collateral effect of the newly introduced minimum wage. At the end of January 2015 the Federal Gov- ernment published its Economic Report for 2015 wherein they raised their growth forecast for the year by 0.2 percentage points to 1.5 percent. The Federal Government anticipates that invest- ments in construction will rise by 2.2 percent, and that private residential construction, due to the overall favourable conditions, will develop more favourably than commercial and public-sector construction. “The outlook for growth in Germany improved further at the beginning of 2015.” The Federal Government is forecasting that the number of em- ployed will continue to increase and push the unemployment rate down slightly to 6.6 percent. Furthermore, they also antici pate that consumer prices will rise at an even slower pace com- pared to 2014 and climb by just 0.8 percent. The finance and capital markets are likely to remain volatile. This outlook is underlined by the exchange rate adjustments seen between the US dollar, British pound, Swiss franc and the euro, or the yen. If the Fed begins its widely anticipated new cycle of rising interest rates in 2015 then ECB monetary policy will be contrary to the policy pursued by the American Federal Reserve System. The objective of the ECB’s programme to buy govern- ment bonds, which was approved in January 2015, is to raise the supply of money and halt deflation. The effectiveness of this programme is the subject of controversial discussions. The burdens on the banking sector will remain at a high level due to the continuing and excessive regulatory requirements. Based on the current status, the introduction of a European banking levy would have a significantly negative effect on banks’ earn- ings situation in the eurozone. A further fall in interest rates to negative interest rates will burden banks’ income. Rising costs and declining earnings will force the banking sector to adjust its strategic direction.