THOUGHTSEconomic scenario 2012We did it:3% growth in 2011.Once again, the German economycame out on top.But while the prop...
*"Three times three" stands for threeconsecutive years of at least 3% GDPgrowth. This is our forecast for theGerman econom...
THOUGHTSEconomic scenario 2012
AUTHORS:Burkhard SchwenkerTobias RaffelEconomic scenario2012WE DID IT: 3% GROWTH IN 2011. ONCEAGAIN, THE GERMAN ECONOMY CA...
Our 2012German economicscenario:3% growthGermanys economy put in a surprisingly healthy                                   ...
04                                                                                                                        ...
GERMANYup 535,000 on the previous year and the highest        public sector layoffs, which saw the demise oflevel since 19...
OURSCENARIOS AS ENTREPRENEURS       METHOD:                                                                    We are not ...
GERMANY5.                                                   6.RUSSIA,                                              THE MAC...
+3.7%                                                         +3.7%                             2006                      ...
OUR "MOOD          BUSINESS       SITUATION AS OF    BAROMETER"          FEBRUARY            2012          THE ROLAND BERG...
GERMANYcountries may see changes in their nationalleadership – are chiefly due to campaign                                ...
▼ Europes culture of  Burkhard Schwenker  Thomas Clark                         craftsmanship and consensus:               ...
EUROPE/GLOBAL ECONOMYEurope andthe global economy:Our outlook for2012So far, our attention has focused on Germany. In     ...
3.0      FORECASTS BY INSTITUTES*                            OUR FORECASTS                                                ...
EUROPE/GLOBAL ECONOMY➞ It is easier to foresee what the future holds ➞ Northern and Easterncountriesare a willfor countrie...
And what comesafter 2012?Germany needsAgenda 2020!Let us conclude our economic scenario by          Our country is still b...
AGENDA 2020economy. Looking back, Agenda 2010 was spot             tive solutions in modern sectors such ason and singular...
5GROWTHFACTORS:OURCRITICALQUESTIONS(EXTRACT)                                       1.                                     ...
LIST OF QUESTIONS3.                                           4.              5.FINANCIAL                                 ...
THOUGHTS            EDITOR            Roland Berger School of Strategy and Economics            Roland Berger Strategy Con...
Roland berger economic_scenario_2012_20120310
Roland berger economic_scenario_2012_20120310
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Roland berger economic_scenario_2012_20120310

  1. 1. THOUGHTSEconomic scenario 2012We did it:3% growth in 2011.Once again, the German economycame out on top.But while the prophets of doomare back at the start of 2012,we remain confidentlyoptimistic.Here is our 3x3* scenario
  2. 2. *"Three times three" stands for threeconsecutive years of at least 3% GDPgrowth. This is our forecast for theGerman economy. We were right twicealready: 3.7% in 2010 and 3.0%in 2011. And we are convinced thatwe will make it again in 2012 –contrary to all current forecasts.
  3. 3. THOUGHTSEconomic scenario 2012
  4. 4. A LOOK BACK:WE HAVE ISSUED REGULARFORECASTS SINCE THEGLOBAL ECONOMIC CRISISOF 2008/09ROLAND BERGER STRATEGY CONSULTANTS Roland BeRgeR STraTegy conSulTanTS Roland BeRgeR STRATeGy cOnSulTAnTS CONTENT conTenT cOnTenT Fresh thinking for decision makers Fresh thinking for decision makers Fresh thinking for decision makers Three questions Developments in "Three times three 20 09 U P D AT E : A P R IL the world - u p d a t e 2 0 1 0 percent" | Our 2011 SCENAR IO SCenar io ate on the crisis: economy io u p d Scenar How deep? | How long? | in 2010 | The effects of optimistic scenario And how quickly will the the crisis so far | Seven for Germany | Recovery economy bounce back?| parameters determine is well underway | Just We tell you what to watch future outlook | Four like we said | And it will out for and provide key issues remain on continue until 2012 | recommendations.| corporate agendas If not longer! FeBRUaRY 2010 FeBRuaRY 2011 MÄRZ 2009ECONOMIC ECONOMIC ECONOMICSCENARIO SCENARIO SCENARIO2009 2010 2011OUR FORECAST: OUR FORECAST: OUR FORECAST:Rapid recovery of the The German economy can Undeterred by turbulence onGerman economy after the grow by at least 3% p.a. the capital markets, the realglobal economic crisis: for 3 years in a row economy stays on its growthOur V-curve scenario trajectory ACTUALACTUAL DEVELOPMENT: ACTUALDEVELOPMENT: 2010 and 2011 proved DEVELOPMENT:V-curve happened as us right – 2012 is still a This forecast has so far alsopredicted question mark proved correct4 THOUGHTS Economic scenario 2012
  5. 5. AUTHORS:Burkhard SchwenkerTobias RaffelEconomic scenario2012WE DID IT: 3% GROWTH IN 2011. ONCEAGAIN, THE GERMAN ECONOMY CAMEOUT ON TOP. BUT WHILE THE PROPHETSOF DOOM ARE BACK AT THE START OF 2012,WE REMAIN CONFIDENTLY OPTIMISTIC.The German economy grew 3% in 2011. The good news economy has been systematically underestimated. But notbroke just a few weeks ago, clearly underlining what good by us. In 2009, we predicted that the economy wouldshape the German economy is in. Its seen over 3% growth experience a V-curve, with a fast recovery following thein four out of the last six years (2006, 2007, 2010, 2011). big drop in 2008/2009. And thats exactly what happened.Moreover, since the global economic crisis of 2008/2009, We then forecast growth of at least 3% in 2010 and 2011.the German economy has been growing faster than that We were right again.of any other highly developed nation. The figures speak Luck naturally played a part in the high accuracyfor themselves: Average GDP growth in the post-crisis of our forecasts. But right from the outset, we firmlyyears 2010 and 2011 was 3.4% in Germany compared to believed in the inner strength of the real economy. We2.4% in the United States and just 1.7% in Japan. Germany didnt allow ourselves to be distracted by the turbulenceis growing more strongly than the rest of the triad – on the financial markets. We looked at the long-term,despite the euro crisis. fundamental strengths and weaknesses of the economy Germanys dynamic growth took almost everyone by and made a conscious decision not to go with the flow.surprise. Since the 2008/2009 crisis, forecasting institu- We preferred to trust our own methodology (see box ontions have been adjusting their predictions upward on a page 9) and base our forecasts on what it was telling us.regular basis – no fewer than 6 times last year. In other Now, we once again present our forecasts – this time forwords, the unique nature and strength of the German 2012 and 2013. THOUGHTS Economic scenario 2012 5
  6. 6. Our 2012German economicscenario:3% growthGermanys economy put in a surprisingly healthy The actual questions 1.showing in 2011. Yet mainstream forecasters are we asked can bestill pessimistic about 2012. Leading forecasting found at the end of this study MANUFAC­institutions predict that the German economywill grow by just half of one percent in 2012 on TURINGaverage. We beg to differ. Were sticking to our"3x3" scenario: three consecutive years of at least COMPETENCE3% growth in Germany. We believe that theinner strength of the German economy, the IS KEYmomentum for growth carried over from 2011,global growth potential in the US, Asia andRussia, and the chance of forging a unitedEurope will ensure 3% growth in the German OK, our first argument – the most importanteconomy in 2012 for the third year running. one – is perhaps a rather philosophical one.If, at the end of the day, Germany manages only But we put it in first place because it is the basis2.5% or even 2% growth, our scenario would be on which we build our whole scenario. We areoff the mark – for the first time ever – but it convinced that a countrys economic strengthwould still be an excellent result for the German and growth potential is revealed by its compa-economy and for all of us. At the very least, nies. And German firms display a uniqueit would be a result worth fighting for. combination of manufacturing competence In recent weeks, we have looked long and and outstanding management skills.hard at the growth factors driving the German What makes the German economy strongeconomy. We have discussed our findings with – and at the same time sets it apart from thecolleagues and clients around the world. The economies of almost all other industrializedresults of our investigation boil down to seven nations – is its excellent mix of world-leadingkey points that support our optimistic 3% major corporations and small and medium-sizedgrowth scenario. Lets look at them in turn. enterprises (SMEs). No less than 500 German SMEs are world leaders in their own segments.6 THOUGHTS Economic scenario 2012
  7. 7. 04 ▼ European managementn schlechteren Ruf als Journalisten. Im Management ist ihr Ruf noch schlechter. Eine Roland-Berger-Studie zum Informations- und Entscheidungsverhalten von Führungskräfteni GERMANY 04 style: More on this innd Kollegen, Professoren und Berater, „wirtschaftsfremde“ Familienmitglieder, ja selbst unmittelbare Konkurrenten im eigenen Unternehmen gelten als vergleichsweise glaubwür-würdigkeit“ nur noch von Politikern übertroffen. Auszug aus diesem Buch our publication "Europa führt!"nagementmodell als Vor- „Wir können also festhalten, dass ne- EDITION CEO ts- und Finanzkrise hat ben der Kurzfristigkeit, der Zahlen- EUROPA FÜHRT!e Managementansatz einen gläubigkeit und einer übertriebenenheuen braucht, im Gegen- Kapitalmarkt- und Finanzorientie-ärken Europas gehört die hmen. Dazu kommt diepas Unternehmen setzen ("Europe shows the way!" rung als Kennzeichen des „American Way of Management“ auch das Wer- tegerüst im Hinblick auf erstrebens- Available in German only) n Wettbewerbern ab. Sie werte Ziele und die Selbstsicht der g profitabler, sind interna- Manager eine wichtige Rolle spielen. trale Frage dieses Buches Unverblümt formuliert werden die esser, oder gibt es einen Unterschiede zwischen Amerika und en europäischen Unter- Europa und damit die CharakteristikaHerausforderungen besser der amerikanischen Unternehmens- BURKHARD SCHWENKER führung überdeutlich:her: Wir Europäer sind her- Händler- vs. Handwerkerkultur,nft erfolgreich zu stellen Gewinn und persönlicher Reichtum CEO erung, gerade auch, was vs. das Streben, etwas Bleibendes ärkeren Verankerung un- zu schaffen, Shareholder return und chaft, mit einem breiteren olg und vor allem mit un- notwendig ist, um Urteils-n zu erlangen. Europa führt! „profit per share“ vs. langfristige Strategien, Leadership und persön- liche Hybris vs. Management und soziale Kompetenz. yer für die „europäische PLÄDOYER FÜR EIN Die Reihe ließe sich fortsetzen, damitund politisch leistungs-nsere Unternehmen ihre ERFOLGREICHES wird deutlich, woran und warum der „American Way of Management“ ge- en. Wenn wir Europäer n wollen, müssen unsere MANAGEMENTMODELL rade jetzt gescheitert ist und abgelöst werden sollte.“sammenwachsen – dazu 6-4 Another 1,000 companies occupy second or 2. third place in international markets. Our companies enjoy excellent management, are A GOOD flexible and are the worlds best at offering distinctive products. They often have decentral- SPRINGBOARD ized structures that help them understand their local markets better. They think long term and IS GIVEN many of them do not bow down to the false American idol of "shareholder value". In other words, they employ a ▲ superior European style of management – an approach whose substan- Our second argument is considerably more tial benefits we will reap in years to come. tangible. Even if GDP decreased slightly in Q4, Growth potential is all about sustainable we believe that the surprisingly positive figures growth. And sustainable growth is feasible only for 2011 as a whole will feed into continued if companies can reconcile their growth to the growth in 2012. Standard indices support our great challenges facing the planet: climate argument: The GfK consumption climate index change, scarce resources and demographic has climbed noticeably since October (from 5.2 to change. That is to say, if they can create growth 5.6 points), as have the ifo business climate index out of the way they deal with scarce resources. (from 106.5 to 108.3 points) and the German We need manufacturing competence so that we Purchasing Managers Index (from 49.1 to 50.9 can balance limited resources with faster points). These developments will give positive growth in productivity – through smart impetus for consumption and domestic demand production systems, automation, "green tech" – as long as we dont sow insecurity in peoples and energy efficiency. In other words, by minds by constantly talking the economy down. achieving a smart combination of mechanical Indeed, theres no reason for doom and engineering, plant construction, electrical gloom. Germany is on a growth trajectory. engineering and high-end technical services. Here are the facts, in brief: Germany is particularly strong when it comes to doing just that. Accordingly, we believe that ➞ German exports passed the EUR 1 trillion mark in 2011, up 11.4% or EUR 108 billion our manufacturing competence will continue to on 2010, deliver significant growth potential in the future. More on this later. ➞ Retail grew by 2.8%, the biggest leap in 20 years, ➞ German industry experienced its second- best year since German reunification, up 8% on 2010. The weak euro will continue to help here, ➞ Unemployment in Germany fell to 7.3% with more than 41 million people working, THOUGHTS Economic scenario 2012 7
  8. 8. GERMANYup 535,000 on the previous year and the highest public sector layoffs, which saw the demise oflevel since 1990, more than 600,000 jobs due to budget cutbacks,➞ Inflation is running at a manageable 2.3%and the price of raw materials remains moder- are slowing down. At the same time, in January, 243,000 new jobs were created in the privateate for the moment. sector. More importantly, with an eye to the➞ And: not even all the crises and catastro-phes of 2011 – the debt crisis, turbulence on future, Paul Volckers call for Americans to "get back to the belief that we can produce something"the share markets, the Fukushima disaster and appears to have hit home. The Detroit MotorGermanys decision to pull out of nuclear Show, for instance, showed evidence that Americaenergy – have been able to shake the stability is successfully reindustrializing its economy.of the German economy. Quite a remarkable We believe that the United States has theachievement, and one more reason to start the potential to grow by at least 2.5% in year in an optimistic frame of mind. Other forecasting institutions are beginning to revise their growth predictions upward, which3. only strengthens us in our conviction. The current Consensus Forecast (an average ofAMERICA leading forecasting institutions) is that the US economy will grow by 2.2%, or 0.3 pointsWILL higher than the figure predicted three months back. UBS also recently raised its forecast forRECOVER the first quarter of 2012 from 2.0% to 2.2%.Our third argument has to do with export 4. CHINAmarkets. Germanys manufacturing competenceand its good springboard will translate into 3% WILL NOT LETgrowth only if the markets where we sell ourgoods and services are open, flexible and US DOWNgrowing – or at least picking up. This means thatthe United States is our starting point. Now, theUS economy is arguably not as important for usthese days as it used to be. For example, in 2008 Just as important as the US these days is China.two thirds of global economic growth was Many analysts are warning of an impendingattributable to the US, while today that same real estate crisis in China. Some even say theamount is due to BRIC countries. But thats not crisis is already happening. There are reports ofthe whole story by any means. America still job losses and a general overheating of thesends out important signals for global growth, economy. At the same time, growth in theand the EU/US market is – and will no doubt fourth quarter of 2011 was almost 9%, muchremain – one of the biggest in the world. higher than many were expecting. We believeTogether, we account for 42% of world GDP. that the forthcoming changes in the Chinese We believe that in 2012 and beyond, America politburo will have a positive rather than awill stimulate growth. Many analysts are arguing negative impact on the economy and will leadthat the presidential election campaigns will block to further growth. There is still plenty of moneyany growth initiatives. However, current develop- available for fresh economic stimulus programs.ments – particularly on the all-important job Indeed, whatever happens on the politicalmarket – are positive: unemployment fell to 8.3% front, we still believe that the current five-yearin January 2012, its lowest rate in three years, and plan, with its focus on modernizing industry,8 THOUGHTS Economic scenario 2012
  9. 9. OURSCENARIOS AS ENTREPRENEURS METHOD: We are not an economic think tank and take a different approach to forecasting: Instead of relying on econometric models, we use scenarios that reflect our entrepreneurial experience on global markets –CREATE123 4 5 and in doing so we consciously challenge the mainstream.SYSTEMATIZE DEFINE QUESTION THE ANALYZE AS FORMULATEFORECASTING MAINSTREAM MAINSTREAM ENTREPRENEURS SCENARIOSFirst we systemati- We then use them to The third step is to conscious- We take the entire picture Finally, we develop ourcally compile various define the mainstream: ly seek out arguments and created by impressions own opinion based on thisfacts, figures and we identify averages data that contradict the and figures and ask our analysis and formulate aopinions provided by using existing forecasts mainstream. Here we use consulting experts around scenario we believe toothers. and cite representative "symbolic" developments and the world to examine it. be likely. This scenario is expert opinions. impressions, such as Chinas They know their clients, based on our qualitative Expo 2010, which really industries and markets assessment and under- showed off the countrys inside and out and can pinned by selected strength. We also look to incorporate personal views quantitative values. products lauded at trade from select clients. fairs, persuasive political visions and much more.stimulating domestic markets and developing Germany. Growth forecasts for Japan are higher"green" issues, is on the right track. To achieve than they have been for years. The Fukushimathese goals, China needs manufacturing catastrophe, despite its many fatalities and thecompetence – which we in Germany have in countless others who were affected by theabundance. So German companies continue to tragedy, was a major jolt to the country. It hasenjoy tremendous opportunities in China. For led to a new self-perception and self-awarenessour 3% scenario to come true, China needs to in Japan that could easily translate into fastergrow at a rate of "just" 7.5% to 8%. We actually growth. South Korea is another importantbelieve that it will do rather better, maybe even player. Here, Samsung has just announced onehitting 2011 levels. of the biggest investment programs ever: more Even if, for whatever reason, growth does than USD 41 billion this year alone.slow down in China, we believe that otherAsian countries have the potential to step in tofill the growth gap, at least partially, and createadditional growth. These countries are ASEANmembers Vietnam, Indonesia, Thailand and thePhilippines – but also Japan, the fourth-biggesteconomy in the world after the US, China and THOUGHTS Economic scenario 2012 9
  10. 10. GERMANY5. 6.RUSSIA, THE MACRO­BRAZIL AND ECONOMICINDIA SETTINGWILL PLAY WILL REMAINTHEIR PART STABLEOur fifth argument relates to the other BRIC Our first five arguments for a positive economiccountries. Our optimistic 3% economic scenario outlook relate primarily to regional growthrelies on fast growth in these countries, creating potential for Germany. Before we move on toopportunities for German firms. The prospects Europe – our most difficult argument – letsfor growth look good: take a quick look at the other factors that➞ Russia is finally back playing an importantrole for German business. Last year, exports underlie our optimistic 3% forecast: no credit crunch, no new protectionism, no explodingfrom Germany to Russia rose by nearly 32%, to raw materials prices. We are confident that allmore than EUR 30 billion. Russias joining the these threats can be avoided. Heres why:WTO means even greater opportunities for us.Whatever the political situation, we believe that ➞ There is currently no sign of a true credit crunch. The central banks have at last madeRussia will contribute to our growth in 2012. enough cheap money available to the markets and➞ Brazil is hosting two major upcomingevents: the soccer World Cup in two years time there is no evidence that well-managed companies are having any difficulty securing financing onand the Olympic Games in 2016. The associated acceptable terms. Further bank failures, whichinvestments in infrastructure and technology destroy confidence between market participantswill give a positive boost to German companies. and cause the flow of money to rapidly dry up,➞ Last year, India grew by 7.6%, faster than are unlikely at the present time.many were expecting. We believe it will growby at least 7% in 2012. Germanys ever closer ➞ One undeniable danger is that 2012 will see new trade barriers being set up, hinderinginvolvement in India means more growth global trade and international cooperation. Lastpotential. There is certainly a solid platform year, the number of such barriers grew by 53%for further growth, as summarized by the according to the WTO. Recent examples includeIndo-German Chamber of Commerces motto Mercosurs 30% tax increase on imported cars,for this year – "India and Germany: Infinite Chinas momentous self-imposed restriction onopportunities". the export of rare earths, the battle between the EU and the US over subsidies for Airbus and Boeing, and Chinas punitive duties on US cars. A trade war between China and the US would have immense ramifications for the global economy. Fortunately, such a trade war is highly unlikely. The threats we have heard in this direction in 2012 – a year in which both10 THOUGHTS Economic scenario 2012
  11. 11. +3.7% +3.7% 2006 2010 +3.3% 2007 +3.0%+3.0% 2011 +1.3% 20080.0% 3% GROWTH OR MORE IN 4 OF THE LAST 6 YEARS GERMANYS GROWTH RATES FOR THE LAST 6 YEARS Germany passed "our" 3% threshold four times 2009 –5.1%
  12. 12. OUR "MOOD BUSINESS SITUATION AS OF BAROMETER" FEBRUARY 2012 THE ROLAND BERGER BUSINESS INDICATOR 80%* of our more than 200 Partners worldwide rate the current situation on their markets as average, good or very good. And the picture for the coming months is even better: Very good/good 92%* assume that business will remain stable or improve. 34% BUSINESS EXPECTATIONS FOR MARCH TO MAY Better Average 32%*80% 46% Stable Poor/ 60% *92% very poor 20% Worse 8% 100%
  13. 13. GERMANYcountries may see changes in their nationalleadership – are chiefly due to campaign ➞least a the introduction of the ESM, there is at With chance that a proper insolvencypoliticking. code will be drawn up for European countries.➞ Raw materials: In recent months, oil, gas,steel, copper, aluminum, zinc and other raw Witness the planned strengthening of the Commissions role in national budgetarymaterials have not been in short supply, nor questions and the new function of the Euro-have their prices risen greatly. We believe that pean Court of Justice.over the coming 12 months, the prices of rawmaterials will remain within the ranges seen in ➞ We are seeing the beginnings of an "economic government of Europe", or whateverrecent years. As such, they should present no name it will ultimately go by. At the very least,obstacle to the development of the German today it is no longer politically incorrect to talkeconomy. Oil currently costs USD 116 a barrel, about closer European integration, as it was justa good USD 30 (20%) below its peak price in a few months back. That is perhaps the biggestrecent years (USD 145 in June 2008). So even if sign of progress.the price of oil were to go up, the globaleconomy would not come apart at the seams ➞ Finally, the chances of a European rating agency being set up are growing. We have madeovernight. Of course, we do not know at present significant progress on this in recent months. Ifwhether the Iran crisis will escalate. But most nothing else, it is important as a visible symbolgeopolitical forecasts assume that such an of a new European identity.escalation – the impact of which would, of We believe the timing of these points is lesscourse, go far beyond the oil price – is unlikely. important than the dedication and conviction with which they are implemented. It seems to7. us that now, at long last, they are being dealt with in a serious and determined fashion. OfEUROPE WILL course, further compromise will no doubt be necessary given the complexity of the requiredRESOLVE ITS regulatory framework. The coming summits will show how successful we are in launching aDEBT CRISIS new growth policy for Europe. And we believe that growth is what is needed first and foremost to help those countries at risk, such as Italy,Our final argument for our 3% forecast is the Spain and France. That means an aggressivemost difficult one of all: Europe. Regional monetary policy and an acceptance of highergrowth and manageable raw materials prices inflation rates. It also means the EU deciding towill be no good to us if we cannot get Europe revitalize its internal market again to provideand the debt crisis under control. The situation fresh growth stimuli. Mario Montis report toremains complex and intricate. But we believe the Commission two years ago can serve as thethat Europe will manage to find a solution, for blueprint. In it, he addresses all the relevantthe following reasons: points: transportation systems, digitalization, a➞ The eurozone bailout funds – the EFSM andESM – should fully come into their own by the free market for industrial and business services and freedom of movement for workers, coupledmiddle of the year, as planned. In any case, the with the gradual integration of Europes socialrecent downgradings by rating agencies do not security systems.appear to have brought countries to their knees: We are fully aware that Europe – and theFrance and Spain recently secured cheap new euro – are not out of the woods yet. But we aremoney and the stock markets remain cautiously also convinced that the situation can be turnedoptimistic. to good only if we start thinking and talking THOUGHTS Economic scenario 2012 13
  14. 14. ▼ Europes culture of Burkhard Schwenker Thomas Clark craftsmanship and consensus: More on this in our upcoming The publication "The European Way" European Way A Culture of Craftsmanship and Consensus as Beacon for the Global Economy of the 21st Centurydifferently about Europe. We need to drop the These are the seven points underlying ourunconvincing message that there is no alterna- optimistic economic forecast. As we said at thetive to Europe, an idea that generates neither outset, we believe that the inner strength of theoptimism nor empathy. Instead, we need to German economy, the beginnings of anfashion a new European identity and recognize integrated Europe, the positive momentumour European strengths. Two such strengths are carried over from a strong 2011 and the growthfundamental and underlie our optimistic potential for our companies around the worldforecast: ▲ our culture of craftsmanship and our – in the US, Asia, Russia and Brazil – mean thatculture of consensus: Germany can achieve 3% growth in 2012 for➞ By a culture of craftsmanship, we meanthat Europe strives to create something lasting, the third consecutive year. One further argument in support of our forecast for 2012sustainable and enduring – not just for the sake comes from our own barometer, the Rolandof short-term success and personal wealth. Berger Business Indicator (see box on page 12).Craftsmanship lies at the heart of our manufac- When asked about the current businessturing competence, not just in Germany but situation in February 2012 and their businessalso in France, Northern Italy, Scandinavia and expectations for the coming three months, theEastern Europe. overwhelming majority of our 200+ Partners➞ And our culture of consensus? It is easyenough to call for clearer decision-making, around the world were decidedly upbeat. Some 80% said that the current situation in theirstronger leadership – an approach typical of markets was average, good or very good. Asthe British and American business worlds. many as 92% thought that business in the nextBut assigning all authority to a single body or three months would be stable or show furtherindividual within an organization comes at a improvement. Thats the most positive resultprice: the risk of oversimplifying matters, shown by our indicator since we introduced it!polarizing people, underestimating dangersand skirting around issues. Achieving consen-sus is a time-consuming, wearisome processthat offers fewer opportunities for individualsto take center stage. On the other hand, it hasthe potential to deliver long-lasting solutionsand improvements. Consensus leads toinclusion rather than exclusion, sustainablesolutions rather than stopgap measures. Focus on these fundamental strengths– European values, our manufacturing compe-tence, our (superior) management skills, ourculture of craftsmanship and consensus –and the picture of Europe that emerges is morepositive than some seem to think.14 THOUGHTS Economic scenario 2012
  15. 15. EUROPE/GLOBAL ECONOMYEurope andthe global economy:Our outlook for2012So far, our attention has focused on Germany. In and around 5% in the rest of Africa. We arediscussing the strength of German exports, we more optimistic about Japan, however, wherehave also touched on major regions of the world. we predict around 2% growth thanks to theBut what about the global economy overall? And new dynamism driving the economy.will Europe as a whole grow this year? If so, Predicting whether Europe will seeby how much? Here are the arguments weve growth overall is most difficult of all, ofpresented so far: course. For Germany, we base our forecasts on the fact that Germanys above-average➞ The US economy is picking up. With thecurrent recovery in the job market and continuing manufacturing competence means that it stands to profit more than other countriesreindustrialization, we believe a growth rate of from global growth. When it comes to Europe2.5% is possible. as a whole, the picture is more complicated:➞ The BRIC countries are also looking good. ➞ France is key to Europes overall growth.China will achieve at least 8% growth with the Economic research institutions currently expecthelp of its current five-year plan and the related France to stagnate. However, the countrysmodernization of its economy. We expect to see underlying manufacturing competence and the7% growth in India and at least 4% growth in fact that it is drawing noticeably closer toBrazil, in the latter case thanks to the upcom- Germanys economic policies lead us to believeing major events to be held there. Russia should that it may do better than predicted. In fact, werealso manage a good 4% growth following its forecasting 0.5 to 0.75% growth this year inaccession to the WTO. France – bearing in mind that upcoming election campaigns may lead to a change of direction.➞ For are generally in outside Europe, of theforecasts other countries line with those ourIWF: good 5% growth in ASEAN countries,nearly 4% in Latin America (excluding Brazil),just over 3% in North Africa and the Gulf States THOUGHTS Economic scenario 2012 15
  16. 16. 3.0 FORECASTS BY INSTITUTES* OUR FORECASTS 2.5 2.2 2.0GDP FORECASTS FOR 2012 1.9 1.0 0.5 8.2 0.0 Germany EU USA Japan > 7.5 7.0 7.0 4.0 4.0 3.3 3.0 China India Brazil Russia 3.0 2.5 0.5 - 0.75 0.5 0.5 0.0 Italy Spain Portugal Greece n.a. France -0.4 -0.4 UK Poland -1.0 -1.3 3.5 - 4.0 -2.8 -3.0 -3.0* All forecasts are from Consensus, except 3.3BRIC countries and World (IWF) as wellas Greece, Portugal and Poland (EIU)Source: Consensus 1/2012, IWF 1/2012,EIU 1/2012, in-house calculations World
  17. 17. EUROPE/GLOBAL ECONOMY➞ It is easier to foresee what the future holds ➞ Northern and Easterncountriesare a willfor countries on the southern fringes of Europe. different ball game. Many Europe hereGreece will shrink significantly, come what may, enjoy growth rates of 2% or more. We predictand Portugal will share a similar fate (-3%). The almost 3% growth in Norway, 2.5% to 3%forecast for Italy and Spain is decidedly sunnier. growth in the Baltic states, and up to 3%Thanks to the course currently being pursued by growth in Poland, thanks to its manufacturingMario Monti and the manufacturing strength of competence.the north of the country, Italy could limit its"negative growth" to just 1%. The new jobmarket reforms in Spain mean that it may get ➞ The United aKingdom is a special case. Putting aside for moment the politicalaway with a decline of just -0.4% (Consensus). discussion with regard to Europe and the UK (continental Europes growth potential is not dependent on the UK), we expect to see sluggish economic growth (0.5%) due to the UKs manufacturing weakness, despite the action that has already been taken on this front.SUMMARYWe believe that the EU can achieve overall economic growth of around 1% in 2012 – considerablymore than the figures currently put forward by the IWF (-0.5% for the eurozone) and Consensus(0.0%). This is on the condition that Europe manages to achieve a healthy balance between austerityand growth, the necessary savings programs and new growth initiatives. For the global economy, we predict a growth rate of somewhere between 3.5% and 4%, similarto 2011. That puts us a good half a percentage point higher than other mainstream forecasters. Thereason? We believe that global growth in 2012 – unlike in the past two years, where growth wasdriven almost exclusively by the BRIC countries – will be spread more evenly across different regions. THOUGHTS Economic scenario 2012 17
  18. 18. And what comesafter 2012?Germany needsAgenda 2020!Let us conclude our economic scenario by Our country is still benefiting from the funda-briefly looking ahead to Germany in 2013. To mental change of direction given to labormake sure we are all on the same page: Most market and social policy. Having said that, mostforecasters expect 2012 to be a difficult year of the (modest) growth stimulus provided byfollowed by a return to more powerful growth making it easier to dismiss workers, cutin 2013. We disagree with the pessimism non-wage labor costs and boost SMEs has nowregarding 2012 – see above! – but do see the been used up – not least because other econo-danger that the 3% growth rate of recent years mies have become more competitive again atcould come to an end in 2013. Our reasons the same time.are as follows:➞ in largelong term,ofadvanced economies A number empirical studies show THE CORNERSTONESthat, thedont tend to grow by much more than around OF2%. In other words, the current phase of 3%growth is unusually good, and probability alone AGENDA 2020suggests that this is unlikely to continue.➞ Mostcrisis inground losthas the globaleconomic of the 2008/09 to now been We therefore see a significant risk that, follow-regained. While the German economy shrank ing a strong showing in 2012, our currentby 5.1% in 2009, the past two years have growth trajectory could crumble in 2013.made up for the entirety of this slump. Unless, of course, Agenda 2010 can be replacedSo there is no more catching up to do. by a new Agenda 2020. Just as the EU must now launch new growth initiatives to revitalize its➞ Most important of all, thefading noticeablyof the Agenda 2010 reforms is positive impact internal market (our seventh argument for growth), Germany too must move swiftly tonearly ten years after they were introduced. create new opportunities and potential for our18 THOUGHTS Economic scenario 2012
  19. 19. AGENDA 2020economy. Looking back, Agenda 2010 was spot tive solutions in modern sectors such ason and singularly important to German high-end green technologies, energy andeconomic development. Yet even so, the new resource efficiency, mobility and smart produc-reform project must differ on a number of key tion systems. Thanks to its dual system ofissues. In our view, the following points are the vocational training, Germany also has themost important: chance to maintain its lead in productivity by recruiting excellently trained people in the➞ More growth instead of more flexibility:upAgenda 2010 centered primarily on loosening future. The important thing now is for intelli- gent policies and the right conditions to assistrigid structures and making the labor market both areas in such a way that we do not losemore flexible. The focus now, however, must be the momentum seen in recent years. Maybeon generating fresh stimulus for growth. Ten then 2013 can really carry on where 2012years ago, we rose to the challenge of fundamen- leaves off and sustain the 3% growth trajectory.tal changes posed by a flexible global economy.In the face of dogged resistance, obsolete rulesand practices were overhauled. Today the focusmust be on laying the foundation for furthergrowth.➞ market andand new industries instead ofyearslabor Education social welfare systems: Ten theago, the labor market and social welfare systemswere at the core of the reforms. However, Agenda2020 must revolve around two other pivotal policyareas: education and new industries. One aspect ofthis involves at last improving mobility: The influxof young workers will be a critical topic. Another ismaking systematic use of the shift in energy policyto drive further manufacturing growth. Providing nothing unusual happens (and we hope it➞ Collaboration across sectors: The kind ofagenda we are talking about works best when doesnt!), our next scenario update should be out in the summer. In the meantime,the political and business communities pull let us take to heart thetogether – and when other stakeholders such as words of Winston Churchill:the scientific community and the charitablefoundations play their part too. In education and IN EVERY DIFFICULT Y."R&D, many innovative solutions are fashioned atthe point where the government, the economy THE OPPORTUNIT Yand the non-profit sector intersect and interact.The goal of any new agenda must be for specific THE OPTIMIST SEESinitiatives to reinforce this interaction in a waythat benefits German companies. OPPORTUNIT Y.We are convinced that Germany has exactly the DIFFICULT Y IN EVERYright capabilities for a new agenda. Going backto our point of departure, our manufacturing "THE PESSIMIST SEEScompetence creates the conditions for innova- THOUGHTS Economic scenario 2012 19
  20. 20. 5GROWTHFACTORS:OURCRITICALQUESTIONS(EXTRACT) 1. EUROPE DURABLE SOLUTIONS OR THE CONTINUED EROSION OF TRUST? • ill the recent decision to accept W European fiscal union (including stricter budget rules and automatic sanctions) be rigorously implemented? • ill the EFSF and ESM turn out to be W potent medicine in preventing and curing critical debt situations? • oes the EFSF and do larger eurozone D countries still need to fear further credit rating downgrades? If so, will they have a negative impact? • ill we see a European insolvency W code for sovereign states? • ill Greece have its debts canceled W 2. GLOBAL ECONOMIC GROWTH DRIVERS WILL BRIC AND THE US LEAD THE WAY WITH FAST, FORCEFUL GROWTH? • Will China grow by at least 7.5% to 8%? • Will the US manage a sustainable turnaround on its labor market (or will the electoral campaign effectively put all initiatives on hold)? • Will Brazil create new potential for growth (4%), especially thanks to the investments associated with upcoming (or achieve an orderly exit from the major events (the soccer World Cup eurozone)? and the Olympic Games)? • ill the Spanish and Portuguese W • Will Russia manage 4% growth (by governments succeed in convincing continuing to modernize and joining the their people of the need for austerity WTO)? programs? • Will India maintain its growth trajectory • ill financial and economic policy W (7%), or will corruption hinder ongoing integration within the eurozone development in the long run? continue (economic government)? • Will post-Fukushima Japan turn the • ill the European Central Bank keep W corner and experience fresh and up its expansive monetary policy? forceful growth (of over 2%)? • ill the political arena change the tune W • Can stimulus from the ASEAN countries of its communication about Europe Indonesia, Thailand, the Philippines (with a positive, go-ahead message and Vietnam make up for other growth instead of a dour lack of alternatives)? drivers shortcomings? • ill we strike the right balance W • Will upcoming elections in China, India, between austerity programs and Russia and France influence global growth initiatives? growth potential?20 THOUGHTS Economic scenario 2012
  21. 21. LIST OF QUESTIONS3. 4. 5.FINANCIAL PROTEC­T IO­N ­ RAWSYSTEM ISM MATERIALSSTABILIT Y AND REFORMS OR NEW BARRIERS OR MORE SIDESHOW OR NEWA SOURCE OF TROUBLE? OPEN WORLD TRADE? PROBLEM CHILD?• ill we see a credit crunch or will the W • ith the WTO stating that barriers W • Will oil price hikes remain within financial system be able to fund the harmful to trade increased by 53% in tolerable limits (not exceeding 15%) investment needed to fuel growth on 2011, will further trade restrictions in the foreseeable future? reasonable terms? ensue? • Will the Iran crisis escalate? And if so, • ill trust in banks and financial W • f the WTO cannot make progress, will I are there enough ways to quickly managers be restored? bilateral and regional trade agreements compensate for the loss of Iranian oil?• o banks business models work and D succeed? • Will the growing price differential are they are crisis-resistant? • hat will be the impact of Russias W between Brent (the European reference• re the currently targeted capital A accession to the WTO after 18 years of price) and WTI (in the US) lead to an ratios enough? negotiations? imbalance in growth potential?• as enough been done to guard H • ill 2012 election campaigners be able W • Will politically motivated actions – by against further write-downs on the to resist the temptation of protectionism? OPEC, Iran or China, etc. – drive raw treasury bonds of crisis-ridden • ill the climate of negotiations in the W materials shortages and/or significant eurozone states? Doha round improve? price increases?• f the US goes ahead and separates I • ill the EU countries and the US act on W • Will the price of other raw materials commercial and investment banking, their stated intention to dismantle farm (copper, steel, etc.) increase moder- will the ban on proprietary trading subsidies to the benefit of developing ately, as expected, or is there the (known as the Volcker rule) be countries? danger of substantial upheavals? enforced? • ill China, India and other emerging W • Will the increasing consolidation of raw • n the medium term, will the Tobin tax I countries give Western countries easier materials producers negatively impact on financial transactions apply not only access to the markets for capital goods prices in the short term? in Europe but throughout the world? and services?• s further turbulence on the capital I • ill China impose even greater W markets to be expected? And will it restrictions on the export of rare earths? affect the real economy? • ill the dismantling of trade restric- W tions between the US and Europe free up additional growth potential? THOUGHTS Economic scenario 2012 21
  22. 22. THOUGHTS EDITOR Roland Berger School of Strategy and Economics Roland Berger Strategy Consultants Holding GmbH Mies-van-der-Rohe-Str. 6 80807 München Germany +49 (89) 9230-0 THE AUTHORS WILL BE GLAD TO ANSWER ANY QUESTIONS YOU MAY HAVE Prof. Dr. Burkhard Schwenker Chairman of the Supervisory Board +49 (40) 37631-4100 Dr. Tobias Raffel Senior Expert +49 (30) 39927-3559 DESIGN Roland Berger Media DesignFEBRUARY 2012