team spirit - Bankier.pl

Outlook
Global economic environment and
financial markets
We assume that the global economy will continue to grow in
2006 despite higher oil prices, though at a lower rate. While
China (+ 9.5 %) and the Asian emerging markets (+ 6.5 %) are
still achieving strong growth, interest rate increases in the US
over the past one and a half years will have their intended
effect: the real estate boom which supports consumption is
coming to an end, and US economic growth will slow to 3 %.
Interest rate increases are therefore expected to end soon.
Early indicators for the euro area suggest higher growth in
the early months of the year, supported by exports and industrial
activity; ample liquidity will also benefit real investments.
Yet structural problems still largely prevent these favourable
factors from feeding through to incomes and consumption.
Nevertheless, economic growth will be strong enough to permit
some tightening of the expansionary monetary policy in
the euro area.
This economic profile suggests that interest rates in the US
and in the euro area may move closer to each other. Expectations
of low inflation and, above all, high long-term investment
requirements will keep long-term yields low and the
yield curve in the bond market flat. The euro will probably
benefit from global investors’ diversification efforts. For this
reason we believe that the US dollar is facing higher risk:
fundamental factors which were kept under control in 2005
will at least result in stronger volatility in 2006.
Economic prospects in our core markets
The Austrian business sector has started the year with somewhat
greater confidence. Strong impetus comes from export
demand. After a subdued trend in private consumption in
2005 (+1.3 %), growth in this sector will accelerate to about
2 %, supported by lower inflation (1.6 % after 2.1%). On the
basis of high levels of industrial activity at the end of 2005 and
in early 2006, investments should again increase more strongly
after having stagnated in 2005. Against the background of
slightly slower growth of the global economy and uncertainty
over future developments in key markets such as Germany
and Italy, however, the Austrian economy will slacken somewhat
in the course of the year.
Economic performance and forecasts
Real GDP, % change on previous year 2004 2005e 2006f
Global economy 3.9 3.3 3.0
USA 4.2 3.5 3.0
Japan 2.3 2.5 2.2
Asian emerging markets 7.7 6.9 6.7
Euro area 1.8 1.5 2.1
CEE *) 6.5 5.1 5.3
Austria 2004 2005e 2006f
GDP growth 2.4 1.9 2.4
Private consumption 0.8 1.3 2.0
Investment in equipment 0.5 0.4 4.1
Investment in construction 0.5 1.6 2.0
Exports in a broader sense 9.0 3.4 5.4
Imports in a broader sense 6.2 2.0 4.9
CEE countries 2004 2005e 2006f
Poland 5.3 3.2 4.4
Slovakia 5.5 6.0 6.3
Slovenia 4.2 3.8 4.0
Czech Republic 4.7 4.9 4.4
Hungary 4.6 4.0 4.1
CEE 5 5.0 3.9 4.5
Bulgaria 5.6 5.3 5.5
Croatia 3.8 4.0 3.8
Romania 8.3 3.7 6.0
Bosnia and Herzegovina 5.0 5.5 6.0
Serbia and Montenegro 7.2 5.1 5.0
SEE 6.5 4.3 5.4
*) CEE = CEE 5 + SEE + Baltic countries, Russia, Ukraine
e … estimate; f … forecast
Sources: Bank Austria Creditanstalt Economics Department, national statistics
In 2006 loans will grow at about the same rate as in 2005,
with personal loans again increasing more strongly than business
loans. Monetary capital formation (excluding exchange
rate movements) will proceed more slowly than the particularly
strong growth seen in 2005 (which was driven by pension
planning schemes). The trend in margins will remain a source
of concern as the yield curve will be slightly higher yet flatter:
on account of continued excess liquidity and strong competition
among the differently structured sectors of the Austrian
banking industry, the squeeze on margins is not expected to
ease in the near future. Although the economy is improving,
the rise in the number of businesses newly established in the
past years will again lead to an increase in insolvency-related
loan losses from the low level seen in 2005. Austria currently
records the highest insolvency ratio in Europe, with 288
insolvencies per 10,000 businesses, even if the volume of
insolvency liabilities is low.
Management Report of the Group 41