Geschäftsbericht 2015, englisch

münchener Hypothekenbank eg | annual report 2015 management report 44 Outlook – Opportunities and Risks Economic development and financial markets At the beginning of 2016 optimism was in scarce supply among economic experts. IMF and World Bank lowered their growth fore- casts for the global economy. They do, however, expect the pace of growth to pick up slightly over the rate seen in 2015. The IMF anticipates that the global economy will expand by 3.4 percent in 2016 and 3.6 percent in 2017. In contrast, the World Bank fore- sees growth of 2.9 percent for 2016 and 3.1 percent for 2017, or half a percentage point less for each year. Economic researchers are concerned about a series of risks that could strongly hinder economic development in 2016. At the top of the list is a substantial decline in growth in China followed by burdens arising from geopolitical crises, especially those in the Middle East. Other concerns were low prices for oil and energy, as well as a tightening of the monetary policy in the USA. It is expected that the pace of economic recovery in the eurozone will increase slightly. In their Autumn Forecast for 2016, the EU Commission predicted that the GDP across the European Union will grow by 2.0 percent and 2.1 percent in 2017. Thereby, the aim of the ECB’s loose monetary policy, that continously provides low interest rate and currency conditions, is to support the economic recovery. This will only be achieved, however, if the weaker EU member states carry out structural reforms. Remaining risks fac- ing the European economy are its dependence on the global eco­ nomy, especially the Fed’s interest rate policies in the USA, the fur- ther development of China’s economy and the economies of other emerging markets as well as ongoing geopolitical tensions. The outlook for the German economy remains favourable. The Ger- man Federal Government’s Annual Economic Report anticipates that the German GDP will rise by 1.7 percent in 2016 and will be primarily driven by private consumption and investments in resi- dential housing construction, which are expected to rise by 2.3 per- cent. Against the background of the fragile international environ- ment, the German government plans to increase its investment spending, in particular, to further stabilise Germany’s economic growth. The German labour market is expected to see the num- ber of employed persons increase anew to 43.4 million and the unemployment rate decline to 6.4 percent. The robust upswing will also lead to an unchanging increase in wages and salaries. Consumer prices are expected to rise by 0.9 percent. The aforementioned uncertainties are likely to keep the level of volatility in financial markets high. Furthermore, the Fed’s mone- tary policy, which has embarked on a tightening cycle, made the markets nervous. However, the ECB is expected to continue its very loose monetary policy. The consequences of restrictive bank- ing regulations are becoming increasingly visible in the financial markets. High capital backing requirements for trading books will burden banks’ willingness to provide market liquidity. This also means that greater market swings and bid/ask spreads can be expected. This development will be further fuelled by the low interest rate environment coupled with low potential returns for investors. “Robust growth is expected for the eurozone, and also for Germany, in 2016.” There are no signs visible that the pronounced willingness of policy- makers and supervisory authorities to impose regulations will lessen in 2016. This will lead to more costs for the banking sector, espe- cially those generated by further preparations needed to observe upcoming regulatory requirements, such as the planned introduc- tion of the Leverage Ratio. The private residential property finance sector will be additionally impacted by the implementation of the Directive for residential property loans. We anticipate that the volume of new issues in the covered bond and Pfandbrief market will be at the level seen in 2015. Although the funding levels for Pfandbriefe will no longer be at the low level noted during the year under review, they will, however, not increase significantly. Investor demand for liquid benchmark issues of € 500 million and higher is likely to remain relatively high.

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