Macroeconomic parameters

The global economy has once again lost growth momentum over the course of financial year 2022/23. The trajectory and costs of potential crises associated with the current geopolitical tensions are not yet fully foreseeable. This means that all forecasts on the development of economic conditions are subject to an extraordinarily high degree of uncertainty. We expect the global economy to undergo weak growth in financial year 2023/24, similar to the previous year.

The German economy is still on the threshold of recession at the beginning of financial year 2023/24. There is no significant economic recovery on the horizon in spite of slightly negative growth in financial year 2022/23. We assume that the German economy will record no growth in financial year 2023/24, with slightly positive development expected over the course of the year. Overall, weak growth is expected for the region West over financial year 2023/24. According to current forecasts, no country in the region is expected to have stronger growth than in the previous year. Slightly positive development is also forecasted for the region East. The growth though will be significantly lower than in financial year 2022/23. Because the countries in the region East are directly impacted by Russia’s war in Ukraine to varying degrees, development on a country level will continue to be very different. For Russia, current forecasts expect stronger economic growth with a moderate dynamic overall. In light of existing sanctions against Russia, goods in demand are being produced by the country itself on the one hand, and, on the other, a portion of the growth is attributable to wartime production. The forecasts are based on the assumption that there will neither be an expansion of the war in Ukraine nor an energy crisis accompanied by a rationing of gas or energy for industry and consumers.

Inflation remains a significantly influential factor. We assume that it will weaken markedly over the course of financial year 2023/24. Inflation rates are expected to fluctuate between low and medium ranges. High rates of inflation in the double-digit range are still expected in Turkey and in Pakistan. Overall, we anticipate a significant decline in price rises for food, similar to energy prices in the previous financial year. In certain countries, there will likely be temporary deflation in the prices for food. Declining prices should have a positive effect on disposable income and therefore on the consumers’ propensity to buy. The restrictive monetary policy should be loosened, provided that price development remains stably within the target corridor of the central banks, for example below 2% for the European Central Bank (ECB). Dropping interest rates and, as a result, lower costs for credit will have a positive and stimulating effect on the economy and private consumption.

Private consumption will develop differently in the different regions reported on in financial year 2023/24. Based on the weak figures from the previous year, we anticipate a revitalisation of private consumption in Germany and the region West over the course of the year. Altogether, growth will remain at a low level. In the region East, private consumption could develop negatively when adjusted for price. It is worth highlighting Turkey once again in this regard; due to the persisting high inflation, current forecasts predict a more pronounced decline in private consumption. By contrast, growth in private consumption of approximately the level of the previous year is expected for Russia.

The table below shows our GDP outlook by our regions.