Core Countries of IMMOFINANZ Group
Overview of the IMMOFINANZ core markets
The countries in Central and Eastern Europe, for example Romania, are gradually confirming their growth potential and benefiting from exports to Germany and other West European countries. A summary of the most important indicators – including GDP growth, inflation, sovereign debt and the unemployment rate – is presented in the following section.
Oxford Economics (OE) is projecting an average GDP increase of 1.6% for the Euro zone in 2015 (2014: plus 0.9%). However, growth should be substantially stronger in the CEE countries: forecasts point to an increase of 3.7% in Poland and 3.1% in Romania. GDP growth in Hungary, the Czech Republic and Slovakia is expected to range from 2.6% to 2.9%. In contrast, the Russian economy will follow a very different course due to the negative effects of the Ruble devaluation and the currently low crude oil price.
Inflation in the European Union remains clearly below 1%. The inflation rate in Russia was significantly higher at 15.8% in May 2015, according to OE, and represents a gradual offset to the effects of the Ruble devaluation on purchasing power.
The average unemployment rate in the EU has improved slightly in recent months according to EuroStat and equalled 9.6% in May 2015. Unemployment is lower in the core countries of IMMOFINANZ Group, with the exception of Slovakia. Sovereign debt in the CEE region is also well below the EU average: according to OE, the gross national debt in relation to GDP averaged 91.9% for the Euro member states at the end of 2014 – which represents another increase in year-on-year comparison. This debt ratio is also substantially lower in the IMMOFINANZ core countries, e.g. Romania (39.8%) and Czech Republic (42.6%).
Unemployment rate in May 2015 in % Annual inflation rate in May 2015 in %1
Gross national debt/ part. estimate for 2014 in % of GDP
Deficit/surplus/ part. estimate for 2014 in % of GDP GDP growth rate for 2014 in %2 Forecasted GDP growth rate for 2015 in %2 Forecasted GDP growth rate for 2016 in %2 Germany 4.7% 0.7% 74.7% 0.7% 1.6% 2.0% 2.2% Austria 6.0% 1.0%p 84.5% -2.4% 0.4% 0.7% 1.7% Poland 7.8% -0.6% 48.7% -3.2% 3.4% 3.7% 3.9% Romania 7.1% 1.3% 39.8% -1.5% 2.8% 3.1% 3.2% Russia 5.9% 15.8% 11.3% -0.7% 0.6% -3.5% 0.8% Slovakia 11.8% -0.1% 53.6% -2.9% 2.4% 2.9% 3.1% Czech Republic 5.9% 0.7% 42.6% -2.0% 2.0% 2.6% 2.9% Hungary 7.1%a 0.6% 72.5% -2.6% 3.6% 2.8% 2.5% EU-28 9.6% 0.3%p 88.6%. -2.9% 1.4% 1.8% 2.1%
Euro zone (19 countries) 11.1% 0.3%p 91.9% -2.4% 0.9%p 1.6% 1.9%
1 Change in the annual average of the harmonised index of consumer prices (HICP) 2 Growth in GDP volume – per cent change in relation to the prior year
EU = EuroStat; Oxford Economics (OE), IMF ; EK spring forecast RU = OE
p = preliminary a = April 2015
Economic Developments
Germany
Germany again served as a key economic driver for Western Europe in 2014. GDP growth amounted to 1.6%, according to OE, and out- paced the Euro zone average of 0.9%. Analysts are projecting an increase to 2% in 2015, which will be supported by the low oil price, the devaluation of the Euro in relation to the US Dollar and exports. Developments on the labour market remain positive with an unem- ployment rate of 4.7%, which is low in EU-wide comparison.
Austria
As reported by OE, GDP growth in Austria failed to reach the EU average (0.9%) with an increase of only 0.4% in 2014. An increase of 0.7% is forecasted for 2015 and 1.7% for 2016. The unemployment rate equalled 6% in May 2015. This represents an increase of more than one percentage point over May 2014, but is still noticeably below the Euro zone average of 11.1%.
Poland
Poland, one of the largest countries in the European Union based on population, generated solid growth of 3.4% in 2014 (2013: 1.6%). With this development, the country again outperformed most of the other economies in Eastern and Western Europe. OE is forecast- ing an increase to 3.7% in 2015 and a possible 3.9% in 2016. This trend will be supported, above all, by rising private and public sector investments, continued strong consumer spending and an improvement in the labour market. The unemployment rate has declined in recent quarters and equalled 7.8% in May 2015.
Romania
Romania substantially exceeded the EU average of 1.4% with a GDP increase of 2.8% in 2014. OE forecasts indicate a further improve- ment to 3.1% in 2015. This growth will be driven, in particular, by stronger consumption, an increase in real wages and a well-planned tax policy. The latest unemployment rate equalled 7.1%, which is comparatively low in relation to the EU average.
Russia
The Russian economy grew by only 0.6% in 2014, and is expected to contract by 3.5% in 2015. This negative trend is a result of the Ruble devaluation, lower revenues from oil exports and the resulting decline in consumer purchasing power. The Russian economy still has substantial inherent potential, but will only return to growth when general economic conditions improve. The unemployment rate equalled 5.9% in May 2014, which is substantially lower than many EU countries.
Slovakia
GDP growth in Slovakia outpaced the EU average with 2.4% in 2014, and analysts are expecting an export-driven increase of 2.9% in 2015. The unemployment rate has been on a decline since the beginning of 2014 but, at the current level of 11.8%, is still higher than the EU average of 9.6%.
Czech Republic
The Czech Republic generated growth of 2% in 2014. GDP forecast for 2015 points to an increase of 2.6%, which will be supported by higher public sector investments and the low oil price. Consumption will be strengthened by low inflation and rising real wages. The unemployment rate was relatively low in European comparison at 5.9% in May 2015.
Hungary
Hungary’s GDP rose by 3.6% in 2015 and is forecasted to increase by 2.8% in 2015. The growth in 2014 was supported primarily by temporary factors that included the increased use of European Union subsidies and particularly good annual output in the agricultural sector. Development in 2015 will be based, above all, on a steady increase in consumption. The unemployment rate improved slightly over the previous year and equalled 7.1% in April 2015.