Report on Expected Developments

1. FUTURE MACRO-ECONOMIC DEVELOPMENT

The report on expected developments considers the relevant facts and events known as at the date the report was prepared, which could influence future business development. The forecasts are based primarily on the analyses of the International Monetary Fund (IMF) and the joint forecast.

Forecast economic data for REWE Group countries
in %1GDPInflationUnemployment
2018p2019p2018p2019p2018p2019p
Germany1.51.31.82.03.23.0
Austria2.82.22.12.14.84.6
Czech Republic3.13.02.22.32.22.2
Italy1.00.61.21.310.710.4
Hungary4.03.32.83.13.73.5
Romania4.03.44.43.54.64.2
Slovakia3.94.12.62.46.86.0
Russia1.71.62.85.15.55.3
Bulgaria3.63.12.42.45.34.6
Switzerland3.01.81.11.42.82.8
United Kingdom1.41.52.52.14.24.4
Sweden2.42.21.92.06.36.0
Lithuania3.52.92.72.76.15.8
Norway2.12.11.92.03.83.7
Denmark2.01.91.01.55.14.8
France1.51.52.11.89.18.7
Ukraine3.52.710.97.39.49.2
Croatia2.82.61.61.89.78.6
  • Sources: International Monetary Fund, World Economic Outlook Database October 2018, Update January 2019; Joint forecast (Autumn 2018)
  • p = projected; ¹ year-on-year GDP change in per cent

Germany will report lower growth in 2019 than in 2018. The issues facing the automotive industry and a slowdown in production in the second half of 2018 will have a knock-on effect on growth in Germany in 2019. An upturn in consumer spending and increasing wages will have a favourable impact on domestic demand, which will remain the primary force driving economic growth, while the shortages on the labour market will limit growth opportunities. Stable demand for labour and slower growth in the number of gainfully employed people will lead to a tightening of the labour market. This is particularly evident in the construction industry, which already reached its capacity limits in 2018. It is unclear how the USA's future economic policy and the developments relating to the United Kingdom's withdrawal from the EU will affect the global economy.

For Austria, we expect weaker growth in 2019 than in 2018. The Austrian economy will be primarily shaped by stable domestic demand and weaker, but still favourable investment activities. Private consumption, driven by the increase in real wages in 2018, will continue to underpin the economy. The unemployment rate will improve to 4.6 per cent. We expect consumer prices to reach 2018 levels.

Economic development in Italy for 2019 shows a downward trend, at 0.6 per cent, and is expected to lag well behind the European trend. The current uncertainty regarding Italy's economic development was exacerbated further by declining investments in the second half of 2018 and the Italian government's budget dispute with the EU. The high level of government debt and the tense situation on the financial markets have increased the risk for 2019.

The Eastern European economies in which the REWE Group is represented will lose momentum in 2019. Due to the slowdown in the global economy, declining exports will adversely impact growth. The current difficult situation facing the automotive industry in Europe may also have a dampening effect on the economic development in those countries. The increasing employment trend in some countries may lead to an increased shortage of skilled workers.

Compared to 2018, economic growth in Switzerland will lose significant steam in 2019. The economic slowdown in the euro zone and rather subdued growth in domestic demand will reduce growth. In the case of investments in particular, lower growth is expected due to the global economic uncertainties.

Economic development in the United Kingdom is characterised first and foremost by the uncertainties surrounding the upcoming Brexit. Generally, growth rates are expected to stabilise in 2019 as against 2018. As previously, there is great uncertainty as to the future development of the country, particularly with respect to the outcome of the negotiations with the European Union.

We generally continue to anticipate stable growth rates in Scandinavia for 2019, and expect growth in Norway to remain level compared to 2018. Growth in Sweden and Denmark will decline slightly year on year. The high level of domestic demand will continue to be the driving force for the economy.

In France we expect economic growth to remain level year on year, at 1.5 per cent. Higher wages and tax breaks as well as social programmes launched by the government (reducing social security contributions, increasing minimum wage, etc.) are intended to increase purchasing power. While this would boost private consumption, it would also raise government debt. The unemployment rate is expected to improve to 8.7 per cent. We see a risk in prolonged protests by the "yellow vest" movement, which could adversely affect consumption and investment in 2019.