Macro­economic parameters

The global economy continued to be shaped by geopolitical tensions in financial year 2023/24. As it is difficult to predict the further course of events in the various crisis situations, all forecasts of how the economic conditions will evolve are subject to an extraordinarily high degree of uncertainty. We expect the global economy to grow at a similar level to the previous year in financial year 2024/25.

The German economy will not experience any significant revival in financial year 2024/25 either. Despite slightly negative growth in the previous year, we anticipate that the German economy will record no growth in financial year 2024/25, meaning that, in our expectation, the world’s third largest economy will fail to grow for the 3rd year in succession. Likewise, we anticipate that the regions West and East will achieve only sluggish growth in financial year 2024/25, similar to the previous year. This means that economic growth in the region will again fall short of the growth rates before the outbreak of Russia’s war in Ukraine. Because the countries in the region East are directly impacted by the war to varying degrees, development on a country level will continue to be very different. For Russia, current forecasts predict that economic momentum will slow, although the Russian economy will continue to expand. Since sanctions on Russia continue to be in place, Russia still has to produce a large number of consumer products and war materials itself.

Changes in inflation remain a key factor impacting on economic development. A decline or stabilisation of inflation within their target corridors allows central banks to loosen restrictive monetary policy and provide stimulus for the economy and private consumption by cutting interest rates. Current forecasts predict a decline in inflation for most countries. Because of high wage settlements, core inflation remains the key driver of inflation in many countries. By contrast, increases in food and energy prices are expected to be below the overall rate of inflation. Given the poor performance of the economy, we anticipate further cuts in interest rates in the Eurozone while inflation continues to be low. The Turkish government has launched an austerity programme to fight hyperinflation and reduce the very high interest rates in the medium term. Russia’s overheated war economy is expected to maintain inflationary pressure and give the central bank little scope for interest rate cuts.

On the back of increased consumer confidence, growth in private consumption in Germany and the region West in financial year 2024/25 will outpace the previous year. The increase in private consumption is anticipated to exceed growth in Germany’s gross domestic product. For Russia and the countries of the region East excluding Turkey, we expect stronger growth in private consumption, broadly on a level with the previous year. For Turkey, current forecasts predict a more pronounced decline in private consumption because inflation is still high.

The table below shows our GDP outlook by our regions.