Macroeconomic parameters

Global economy

The global economy in financial year 2016/17 was characterised by a significantly more stable and pronounced growth than in the preceding years. This economic recovery is expected to continue in financial year 2017/18, with the United States and important emerging countries, such as Russia and Brazil, returning to an economic growth trajectory on the back of a recovering oil price. These countries will continue to drive growth in financial year 2017/18. The economies in the European countries also delivered a more stable performance and benefited from the European Central Bank (ECB) taking a very gradual approach in reducing its bond purchasing programme (quantitative easing) in combination with a very moderate increase in the inflation rate. The future development will nevertheless be shaped by numerous economic and political factors that could potentially also have a negative impact on the global economy growth. Among these uncertain factors are: the withdrawal of the United Kingdom from the European Union, continuing sanctions against Russia stemming from the Russia/Ukraine conflict, unpredictable economic and trade politics in the United States, China’s economy losing steam, as well as political unrest worldwide.

On balance, we expect the inflation-adjusted global economic growth for the year 2018 to resemble growth in the year 2017 with a growth rate of approximately 3.7%.

Germany

The sound development of the German economy will continue in financial year 2016/17. As the current economic upswing is supported by a variety of factors that are unlikely to change significantly, we only expect a slight drop in the growth rate to +1.8% for the year 2018. The continued positive development on the German labour market continues to invigorate private consumption. The growth trend in retail sales in Germany is expected to retreat slightly in 2018, so realistically growth will be just under 2%. This is due to an assumed rise in the inflation rate, which could possibly result in declining real wages.

Western Europe

In Western Europe, financial year 2016/17 was characterised by a beginning economic recovery. For 2018, we expect 1.8% of growth and thus anticipate another year of stable growth, as the labour market recovery and strong consumer confidence should continue. Spain and Italy are however exposed to other political risks that could potentially subdue the expected growth rates. The most recent monetary policy decisions by the ECB appear to indicate a very slow return to higher interest rates, which continue to drive growth in the European economies at their relatively low current levels. Retail sales are expected to experience a similar growth as in the previous year, which should be positive after adjustment for inflation.

Eastern Europe

The performance of the economies in Eastern Europe in financial year 2016/17 was distinguished by solid growth, especially in the later months of the financial year. This positive trend will be sustained in the year 2018 and we expect an inflation-adjusted economic and sales growth of +2.7% for this region. Our outlook for the Russian economy is a continued economic recovery and sustained growth in 2018. We also expect the economy in Ukraine to pick up, whereas the Turkish economy will not quite reach the level of the positive development of 2017 in 2018 due to the political situation and increasing isolation. The economic performance of the Central European countries was slightly divergent, but the consistently positive development on the labour markets in these countries results in a positive outlook for 2018.

Asia

The Asian economies continued their dynamic growth trajectory in financial year 2016/17. The Chinese economy reported solid growth rates. Signs for an economic recovery were also observed in Japan. We expect this region to deliver an inflation-adjusted economic growth of just over 5% in the year 2018, a similar level as in the previous year. With a growth rate of close to 8%, we expect India to be among the drivers of economic growth in the region. While retail sales will also grow in 2018, their development may still lag behind the overall economic growth.