Economic environment
Future macroeconomic situation
Following the intensification of the worldwide financial and economic crisis in the early months of the current year, there is generally considerable uncertainty as to the development of the economic environment and capital markets that should be anticipated in 2009 and 2010. Essentially, it is not possible at the present time to make reliable statements as to how serious the recession triggered by the collapse of the financial system is likely to be and how long the recession will probably last. This forecasting uncertainty is principally due to the fact that the prevailing financial and economic crisis is a historically exceptional situation, for which the past patterns used to support forecasts do not produce viable and robust statements.
Against this backdrop, the most likely scenario is that 2009 will see a slump in the world economy and a continuing global recession. This assessment is shared by leading international institutions such as the International Monetary Fund (IMF) and the World Bank, which for the first time since 1945 are forecasting a contracting world economy for 2009. While economic forecasts for the Eurozone anticipate a decline of around 3% in gross domestic product, the expectations for industrial output in Germany are for the most part even more pessimistic: overall, the most severe economic collapse since the founding of the Federal Republic is to be expected here in 2009.
Considerable hopes have therefore been placed in the economic stimulus packages launched by governments all around the world; combined with a continued expansionary monetary policy on the part of the most important central banks that extends as far as a “zero interest rate policy”, the hope is that sufficient impetus for renewed growth can be generated. In a best case scenario, for example, a gradual stabilization and recovery of the economic situation could begin to set in from around the third quarter of 2009 onwards.
Capital markets
Given that at least the first half of 2009 – and possibly also a time horizon stretching into 2010 – will thus be entirely overshadowed by the global recession and the associated uncertainties, risk premiums in the area of corporate bonds will probably remain on an unusually high level. The expected rise in the level of new public borrowing as a consequence of government rescue packages and economic stimulus programs will, on the other hand, lead to increasing issuance of government bonds. Despite offering a relatively low return, these government bonds will probably meet with sufficient demand owing to the pronounced risk aversion currently prevalent among market players. It is as yet still too early to predict if and when the low-interest phase will give way to a scenario of rising interest rates as a consequence of resurgent inflationary expectations and economic revival.
As far as equity markets are concerned, the indications at this point in time do not as yet point to a sustained upturn. This view is supported above all by the low probability that corporate profit expectations – which have fallen sometimes dramatically in the wake of the financial and economic crisis – could return to pre-crisis levels in the short term.