Economic Environment

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1. Macroeconomic development

The economy in Germany once again experienced stronger year-on-year growth in 2017: GDP increased by 2.5 per cent (previous year: 1.9 per cent). The economic upturn was even more broadly based than in 2016: In addition to private consumption, which benefited from real income growth, increasing private and public investment, which was fuelled by low interest rates and an uptick in foreign demand, also bolstered the positive development in 2017. In 2017, inflation rose to 1.6 per cent (previous year: 0.4 per cent) as a result of, among other factors, rising energy prices. This positive economic development was also reflected on the labour market: Unemployment was at a very low level at 3.6 per cent (previous year: 4.2 per cent). 

GDP in Austria grew by 2.3 per cent in 2017 and was thus significantly higher than the 1.2 per cent forecast and was up year on year (1.5 per cent). This was due in particular to strong domestic demand, which was bolstered by both private consumption and a high level of investment, as well as increasing foreign demand. Private consumption was lifted primarily by the improvement on the labour market: unemployment fell to 5.4 per cent (previous year: 6.1 per cent). Inflation rose to 2.0 per cent (previous year: 1.0 per cent). 

The economy in Italy grew in 2017 by 1.6 per cent (previous year: 0.9 per cent). This growth was due in particular to increasing domestic demand as well as rising foreign demand. Unemployment fell slightly to 11.2 per cent (previous year: 11.7 per cent), due among other factors to an increasing number of workers with fixed-term employment contracts. The inflation rate rose to 1.4 per cent (previous year: -0.1 per cent).

The economies in the Central and Eastern European countries in which the REWE Group is represented developed positively in 2017. Bulgaria, Croatia, Romania, Russia, Slovakia, the Czech Republic, Ukraine and Hungary experienced an upturn, with Bulgaria, Romania, Russia, the Czech Republic and Hungary exceeding forecasts and prior-year growth rates. GDP growth in Slovakia was at the same level as in the previous year and in line with forecasts. Economic growth in Croatia and Ukraine was less pronounced than in the previous year, although Croatia managed to beat its forecast despite the collapse of the country's largest private company. The upturn in all countries was supported mainly by private consumption, which benefited from rising wages due to the positive employment figures, and rising exports. The availability of EU funds to finance and implement economic measures (e.g., increase in minimum wages and tax cuts) also strengthened domestic demand. Rising real incomes benefited private consumption. Unemployment rates fell sharply in all countries except Russia and Ukraine. The high inflation rates of the previous years in Russia and Ukraine continued to fall. In all other countries, the inflation rates rose year on year.

In Scandinavia, each of the three countries beat the economic forecasts, with Sweden falling slightly below the prior-year figure to post a strong 3.1 per cent economic growth. Denmark and Norway generated higher year-on-year economic growth. Inflation in Sweden and Denmark rose year on year, while price rises in Norway were less pronounced than in the previous year, at 2.1 per cent. Unemployment fell in each of the three countries.

Economic growth in Switzerland was slightly slower than in the previous year and fell short of expectations with GDP growth of 1.0 per cent. Unemployment fell to 3.0 per cent (previous year: 3.3 per cent) and was thus significantly below the forecast of 4.3 per cent. Inflation rose to a moderate 0.5 per cent, which was primarily the result of the devaluation of the Swiss franc.

In the United Kingdom, economic growth in 2017 was 1.7 per cent, down year on year (previous year: 1.9 per cent). This was caused mainly by the uncertainty surrounding the consequences of exiting the EU ("Brexit"). The unemployment rate fell to 4.4 per cent (previous year: 4.9 per cent). Inflation rose significantly to 2.6 per cent (previous year: 0.7 per cent), primarily as a result of the devaluation of the pound prior to and following the Brexit referendum.

Changes in economic data for REWE Group countries
in %1GDPInflationUnemployment
20162017p*2017p20162017p*2017p20162017p*2017p
Germany1.91.52.50.41.51.64.24.03.6
Austria1.51.22.31.01.62.06.16.05.4
Czech Republic2.62.73.50.71.42.44.04.03.0
Italy0.90.71.6-0.11.01.411.710.911.2
Hungary2.02.53.20.51.92.54.95.34.2
Russia-0.21.11.87.05.04.25.55.95.5
Romania4.83.85.5-1.11.51.06.06.25.2
Slovakia3.33.33.3-0.51.11.39.79.47.8
Bulgaria3.42.83.6-1.30.61.27.77.76.1
Switzerland1.41.31.0-0.40.20.53.34.33.0
United Kingdom1.91.51.70.72.52.64.95.44.4
Sweden3.22.63.11.11.52.07.06.76.8
Norway1.11.21.43.62.92.14.74.34.0
Denmark1.71.41.90.01.31.16.25.95.8
Ukraine2.32.52.013.911.012.89.38.79.5
Croatia3.02.12.9-0.60.91.313.313.410.8
  • Sources: International Monetary Fund, World Economic Outlook Database October 2017, Update January 2018; Joint forecast (Autumn 2017)
  • p=projected; p*=projected in previous year
  • Year-on-year GDP change in %