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Annual Report 2016

Future parameters

Economists anticipate three and a half percent growth for the global economy in 2017. The reasons are the following: the Chinese economy is stabilising, Europe is recovering despite Britain’s vote to leave the EU and the banking crisis in Italy, and the US economy is growing faster than in the first half of 2016. Nevertheless, the real impact of the political factors is hard to foresee.

Despite the uncertainties surrounding the politics of the new US president, the International Monetary Fund (IMF) views the United States as the driver of an accelerating global economy. It estimates that global growth will reach 3.4 in 2017 and 3.6 in 2018. China, Europe and Japan could likewise help the global economy to grow faster in 2017 than in the previous year. The IMF voiced these expectations in its updated economic outlook in mid-January 2017. However the latest IMF outlook features exceptional uncertainty. The economists currently identify the biggest risks to growth in the slowdown in China, the tightening of monetary policy in the USA coupled with a strong dollar, and a possible escalation of existing geopolitical tensions.

The IMF envisages little change for the eurozone. The single currency area is expected to grow by 1.6 percent in each of the next two years, as previously forecast. Germany is marginally below this figure at 1.5 percent for both years. Because there are parliamentary elections in four member states of the eurozone in 2017, the uncertainty surrounding the direction of economic policy is considerable.

Growth Forecast of Gross Domestic Product in percent

  2017 2018
World 3.4 3.6
USA 2.3 2.5
Eurozone 1.6 1.6
Germany 1.5 1.5
China 6.5 6.0
Emerging countries 4.5 4.8

For the US economy, the OECD anticipates only moderate acceleration in growth in 2017 to 2.3 percent, but then a vigorous jump in growth of 3 percent in 2018. The negative side-effects of the extremely low interest rates are now also increasingly becoming clear, with growing risks to the stability of the financial sector.

As the German Engineering Federation (VDMA) established, the mood in the industry that is the German economy’s biggest source of employment is better than at the start of the previous year. For the new year, the federation forecasts real growth in output of one percent – on the back of a flat performance in 2016. This slight growth is attributed to growth opportunities for exports to developing and emerging economies. A real increase of 2 percent in machine revenue worldwide is forecast for 2017. The People's Republic of China aims to position itself at the vanguard of industry with the “Made in China 2025” program. Sophisticated technology and automation engineering from Germany will also have an indispensable role to play here.

The United States will remain the largest single export market for the German mechanical engineering sector in 2017. Uncertainty is driving a reluctance to invest, while protectionism and new trade barriers will ultimately not help either the USA or its trading partners to achieve additional growth.

Sentiment in German industry fell back unexpectedly sharply at the start of the year. The worsening of the mood pervaded all sectors of the economy covered by the ifo barometer.