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management report investor relations/post-closure report/outlook pfleiderer ag 61
post-closure report/outlook
Underlying Economic Conditions
At the start of 2003, the global economy showed signs of uncertainty, making it difficult for
the leading market research institutions to provide a reliable prognosis. The threat posed
by the Iraq conflict, rising oil prices and the lack of perspective on the international capital
markets resulted in uncertainties continuing into the new year. The way the US economy
progresses will determine developments in 2003.
According to the forecasts of the Ifo Institute, the dollar will continue to weaken in 2003.
The reasons for this are seen in the continued fear of terrorism, as well as the USA’s rising
budget deficit, continued capital market fluctuations and low interest rates – the US Federal
Reserve having lowered its base rate to 1.25 percent in November 2002. However, analysts
are expecting a slight upward trend in the business cycle in 2003, provided private consumption
and house construction return to more normal levels. The USA is expected to expand
its exports, taking advantage of the weak dollar. Real GDP is expected to increase by around
2.5 percent in 2003.
In Europe, 2003 will start with just a slight increase in demand and production. Increases
in taxation and other levies, as well as construction projects that had been brought forward to
autumn 2002, will tend to retard growth. Real GDP in Europe is expected to increase by around
1.5 percent. Capital investment in the construction sector is expected to reach its lowest point
during 2003.
The announcement and partial implementation of higher taxes and social charges by
the Federal Government at the end of 2002 has also increased the gloom about the German
economy. However, although private consumption is at a low ebb, uncertainty is expected to
clear as the year progresses and a slight revival takes place. As the global economy slowly
picks up again, German exports will also start to rise in 2003. With regard to the euro-dollar
rate, price competition will not worsen as badly as it did in 2002. Particularly countries in
central and eastern Europe, currently setting up their economies, expect to exhibit stronger
demand for capital goods (Ifo Economic Forecast 2003).
On the other hand, the Hamburg World Economic Archives (WHHA) expects real GDP in
Germany to increase by only 0.7 percent. Furthermore, this market research institute expects
higher unemployment and the danger that the German government will in 2003 again fail to
meet the European criteria, with maximum new borrowing exceeding 3 percent of GDP.