Siemens 2015 Annual Report Download - page 24

Combined Management Report

A.8.1 Report on expected developments
A.8.1.1 WORLDWIDE ECONOMY
Deceleration in emerging markets and especially China weigh
on the outlook for  as well. Global GDP is expected to ex-
pand by . %, with fixed investments growing by . %. Fixed
investments in advanced countries (+. %) are expected to
grow more strongly than in emerging countries (+. %) be-
cause of some investment backlog in the former and over-
capacities in the latter.
The Chinese economy is expected to continue its rebalancing
path towards a more consumption- and service-driven econ-
omy, with GDP growth of . %, which is lower than in calendar
. In this view, industries that have been driving the econ-
omy in the past will keep on consolidating while consump-
tion-oriented sectors and the service sector gain importance.
Meanwhile, fixed investments are likely to grow more slowly
than the overall economy, at around . % in calendar . For
other emerging markets the outlook is mixed. While Brazil and
Russia are expected to remain in recession, the Indian economy
is expected to continue developing strongly, with GDP growth
rates forecast at . % to  % in the coming years. Europe is ex-
pected to remain on a moderate recovery path, with Italy and
France again the slowest-growing among the larger economies
and Spain and the U. K. growing the fastest. The German econ-
omy is expected to benefit from the ongoing European recov-
ery, and growth should accelerate compared to calendar .
For the U. S., GDP growth should also pick up slightly. While the
negative effects of low oil prices on oil and gas-related invest-
ments should start to ease, the positive effects, especially on
private consumption, should support economic growth in that
sector. The U. S. housing recovery is expected to continue.
Despite some positive developments expected for the world
economy in , the risk assessment is clearly biased to the
downside (see A.8.3. RISKS) due to a number of factors. First
and foremost geopolitical risks can dampen the mood for capi-
tal expenditures. China is on a long-term rebalancing path, and
some emerging markets are vulnerable to further capital flight
and exposed to considerable foreign currency debt.
The forecasts presented here for GDP and fixed investments are
based on a report from IHS Global Insight dated October ,
.
A.8.1.2 MARKET DEVELOPMENT
Following weak demand in fiscal , we expect markets for
the Power and Gas Division to pick up in fiscal , particu-
larly with regard to fossil power generation markets, which are
anticipated to grow year-over-year due to large projects in
emerging countries. For the compression market, we expect
demand in fiscal  to stay on the low level of fiscal  due
mainly to continuously low capital expenditures for up- and
downstream applications in the oil and gas industry. Overall,
we assume a shift to more flexible, decentralized power gener-
ation and stronger demand for combined heat and power gen-
eration and off-grid oil and gas applications, particularly in
Europe, China and the U. S.
For the markets served by the Wind Power and Renewables
Division, we expect a slight decline in fiscal  with long-
term outlook still intact. Within this change, we expect lower
demand in the larger market for onshore wind power, particu-
larly in the U. S. and Brazil, only partly offset by substantial
growth in the smaller market for offshore wind power, which is
driven by Europe. Market development depends strongly on
energy policy, including tax incentives in the U. S. and regula-
tory frameworks in Germany and the U. K. While we expect Asia
and the Americas to offer good growth prospects for offshore
wind power in the medium term, we expect only limited mar-
ket volume in these markets in the short term. Overall, we ex-
pect a continuation of the trend towards an increasing share of
renewable energy within the energy mix. Within the onshore
wind power market, we expect a continued rise in demand in
the low-wind segment.
For the markets served by the Energy Management Division,
we expect slight overall growth in fiscal . The Division’s
markets are experiencing rising power consumption due to on-
going urbanization and electrification in emerging countries.
Also the energy mix is changing, with a rising share of renew-
able energy. Furthermore, there is a trend towards decentral-
ized power generation, including an increasing number of
energy consumers who are also energy producers via solar
technology and other means. Within the Division’s key indus-
tries we expect demand from utilities in fiscal  to remain
on the prior-year level. Demand from the oil driven industry is
anticipated to decline further in fiscal , as we expect addi-
tional cuts in investments, particularly in the Americas. For
minerals and mining markets we expect slight growth, with all
regions contributing. However, there is a risk that a further
slowdown in growth in China may impact investment activities
in the minerals and mining industry.
For the markets served by the Building Technologies Division,
we expect solid growth in fiscal . On a geographic basis,
we expect the U. S., China, India and the Middle East to be the
main growth drivers. Most of the European countries are antic-
ipated to continue their recovery, led by Germany and some of
the Northern European countries. In countries with relatively
strong dependence on the development of commodity mar-
kets, we anticipate growth in the Division’s markets to slow
down in fiscal . We expect the Division to see continuing
A. Report on expected developments
and associated material opportunities and risks