Siemens 2014 Annual Report Download - page 225

247 D. Consolidated Financial Statements
337 E. Additional Information
213 C. Overall assessment of the economic position
214 C. Subsequent events
215 C. Sustainability and citizenship
225 C. Report on expected developments and
associated material opportunities and risks
242 C. Compensation Report and legal disclosures
242 C. Siemens AG (Discussion on basis
of German Commercial Code)

C.. Report on expected developments
C... WORLDWIDE ECONOMY
For the year  we expect world GDP to expand by . % with
fixed investment and manufacturing value added growing
even more strongly at . % and . %, respectively. The slight
acceleration compared to . % GDP growth anticipated in 
is expected to be driven mainly by the U.S. economy which
seems to be on a stable recovery path. The monetary environ-
ment is still expansive which should further support growth
especially in the housing market. Nevertheless the outlook for
the world economy remains uncertain, as indicated by the
deterioration of many early indicators (especially for the Euro
zone and China), the increased volatility in equity markets in
October, and the severe decline in oil prices since summer
. On the one hand, the oil price decline is a symptom of
slack global demand relative to supply. On the other hand it is
a stabilizing factor for oil importing countries, because it in-
creases purchasing power for consumers and reduces costs for
many businesses. The biggest downside risks stem from geo-
political tensions. An escalation of the Ukraine conflict would
lead to a steep decline in investment activity. Similarly, further
expansion of the “Islamic State” (including control over import-
ant oil fields) could disrupt global oil markets and hit the global
economy. Further downside risks would also emerge from an
uncontrolled spread of the Ebola epidemic outside West-Africa.
In the region Europe, C.I.S., Africa, Middle East the condition
of many Euro zone economies is a cause for concern. Given the
latest indicators, there is some danger of a possible premature
lapse of the recovery in the Euro zone. In the near term, defla-
tion is the most important threat to these economies. While
the German economy is expected to still suffer from Euro zone
weakness and geopolitical tensions, it should also benefit from
stabilizing factors, such as a relatively strong service sector,
solid consumer demand, strong employment data, a weaker
Euro and cheaper energy. For Russia, the outlook for 
depends on the future course of the Ukraine conflict and the
reaction of western countries, which is not foreseeable now.
While many African countries have achieved a steeper growth
path in recent years, they might be negatively affected by lower
raw material prices and by the Ebola epidemic in West-Africa.
For the Americas, we expect the U.S. economy to be the deci-
sive force. The U.S. recovery seems to be broad-based and sup-
ported by improving labor markets. The possible start of tight-
ening monetary measures should not disrupt the underlying
recovery. The outlook for Brazil, the second-largest economy in
the Americas region, is less optimistic. The expected GDP
growth rate of . % for  (a little more than the population
growth rate) has to be regarded as very low, given the poor
growth rate of . The newly re-elected government has to
enact substantial structural reforms to increase the growth
potential of the country.
As in past years, Asia, Australia is expected to exhibit the high-
est GDP growth. We expect China to contribute the main part of
the region’s growth. However, the Chinese economy still suf-
fers from overcapacities in several industries and fragile real
estate and banking sectors. However, the government should
be able to contain these problems if they become more severe.
China’s gradual shift from an investment-driven to a consump-
tion-driven economy is expected to slow down its economy in
the near term. For India, the outlook for next year is better than
in . Growth should pick up slightly. However, similar to
Brazil, the country needs structural reforms and substantial
improvements in infrastructure.
All in all, for  we expect growth of the global economy to
accelerate slightly compared to . However, there is an un-
usually high number of downside risks, which – even if only
some of them materialize – could substantially weigh on global
economic activity. On the upside, a quick solution of political
conflicts together with strong economic growth in the U.S.
could boost global demand.
The forecasts presented here for GDP, gross fixed investments
and manufacturing value added are based on a report from IHS
Global Insight dated October , .
C... MARKET DEVELOPMENT
In fiscal , we expect growth in the markets served by the
Power and Gas Division to remain on a low level. While we
anticipate slightly increasing market volume year-over-year in
advanced gas turbine markets – especially in the large-scale
range (H class) – we also expect continued price declines due
to manufacturing overcapacities and increased competitive
pressure. We expect growth in the Division’s oil and gas mar-
kets to accelerate in South America and Eastern Europe (e.g.
Turkey, Azerbaijan). Investments in markets in the Americas
are likely to pick up, despite delays, due mainly to demand for
gas-fired power plants. We anticipate flat development for the
coal-fired steam power plant market, due to an anticipated
slow-down in China. We expect that clear growth in distributed
power generation will continue to support growth for the
Divisions’ markets as a whole.
For the markets served by our Wind Power and Renewables
Division, we expect growth in fiscal  to come in slightly
lower than in fiscal , which saw particularly strong growth
rates. For onshore wind power markets, investments in the U.S.
are expected to decline in fiscal , following the strong prior
C. Report on expected developments and associated
material opportunities and risks