World economy

The world economy started the year 2013 with only moderate momentum. The global economy is generally following a sideways movement at the beginning of the year and should therefore at least have left the falling growth rates of last year behind. Nonetheless, the situation remains very difficult and no significant acceleration is to be expected – if at all - before the second half of the year. As in 2012, the world economic outlook is still affected by the difficult situation in the industrialized countries. And developments in the European Monetary Union (EMU) are still particularly critical. Although the various measures taken by the European Central Bank have significantly reduced the risks of the disintegration of the EMU, the underlying problems of the sovereign-debt crisis are far from solved. It must therefore be assumed also for the year 2013 that particularly in Europe, the crisis of confidence amongst investors and consumers will last a long time.

Against this backdrop, the economic outlook for the EMU worsened perceptibly at the beginning of this year. After last year’s recession, gross domestic product is likely to remain flat at best in 2013. Although the overall dampening effects on economic growth of the austerity measures should be weaker than in 2012, the unchanged need for fiscal consolidation efforts continues to restrict domestic demand. So this year, not only small peripheral countries, but also larger economies such as Italy and Spain will once again post decreases in their GDP. While a number of other countries will at best achieve marginal growth, the German economy is likely to develop better than the EMU average once again. But also Germany will find it very difficult to achieve growth of more than 1%, and the consensus expectations at the beginning of the year are distinctly lower than that.

The economic outlook for the United States is significantly better than for Europe, and the currently available leading indicators confirm this picture. At the turn of the year, the dominant economic issue was avoiding the so-called “fiscal cliff” resulting from the discontinuation of fiscal stimuli on the one hand and automatic budget cuts on the other. Although agreement was finally reached between US politicians to avoid most of the negative fiscal effects on the economy that would otherwise have occurred in the first quarter, public debt remains a serious problem in the United States. With forecast GDP growth of approximately 2%, the prospects for the US economy therefore remain limited. In Japan, growth expectations had fallen so substantially below 1% that in January, the new government announced a stimulus program and the central bank announced additional expansive monetary measures.

In view of the economically rather disappointing industrialized countries with hardly more than 1% growth, the emerging markets will once again be the drivers of the world economy. In total, the emerging economies should grow by approximately 5% in 2013, and would thus account for three quarters of global growth. It will be of overriding importance that economic stabilization in China makes further progress and that the measures initiated take effect so that economic growth in the magnitude of about 8% is possible. It will also be important that Brazil gains perceptible impetus from increased investment after last year’s economic blip, and that the Indian economy can overcome its phase of weakness. But growth should also occur in 2013 in those economies of Central and Eastern Europe which were still in recession last year. However, the growth weakness of the major sales markets of Western Europe will prevent a more favorable development. In the Middle East, considerable geopolitical tension is worsening the economic outlook. Further escalation could lead for example to large fluctuations in the price of oil.

In total therefore, global economic output could expand by approximately 2.5% to 3% at best in 2013. This would then be another below-average year in a long-term comparison. Another factor is that the world economy remains very sensitive to external disturbances. In this difficult environment, monetary policy will continue to be expansive and supportive, but at the expense in the medium term of an increased risk of inflation and possibly of bubbles being created in the asset and commodity markets.

With regard to the currencies important for our business, we continue to anticipate sharp exchange-rate fluctuations.