Anticipated developments in the underlying economic situation

Economic forecasts continue to be positive

In Germany, continued favorable investment conditions and the positive international environment will ensure the continuing strength of the economic recovery according to ifo economic forecasts. Initially, the increase in the value added tax will slow growth in demand for domestic consumer goods on the whole. There are, however, no indications of declining growth in domestic capital goods or export demand. Higher government revenues have a tendency to provide greater leeway for federal, state and municipal public investment, in particular with respect to modernizing public administration by means of information technology.

In the U.S., the gross domestic product is expected rise slowly initially, but pick up speed during the course of the year. Despite contradictory economic indicators, experts are predicting a robust rise in consumption. One consequence of the weakness in expansion prospects, coupled with the high U.S. current account deficit, is uncertainty in the currency markets. This has already led to depreciation of the dollar against the euro. If the U.S. economy were to experience a major cool-down along with a significant depreciation of the dollar, international conditions would deteriorate for the German economy.

The German economy is currently less dependent on the global economy to approximately the same extent that export risks have grown. Major impetus is coming from the domestic sector at the moment, which is lessening susceptibility to problems from abroad. The gross domestic product is expected to rise considerably in the eurozone. Consumption should pick up at a lively pace given the improved job market. Investment is expected to expand more slowly, but perceptibly nevertheless.

For Japan, experts forecast that the increase in production will continue, albeit at a slower pace. The gross domestic product of China is forecasted to expand at an accelerated pace. In the other countries of East Asia, and Latin America, the economy is expected to remain sound, but to slow somewhat. Economic development will continue to boom in the emerging economies.