General Economic Conditions.

Further slowdown in economic growth over reporting period.

With regard to the global economy, the pattern of weak economic growth experienced in the previous year was repeated in fiscal 2015/2016. Alongside political uncertainties and increasing risks on the financial markets, it was above all the problems faced by developing and emerging market countries that led various economic observers to scale back their expectations over the year. The International Monetary Fund (IMF) downgraded its growth forecast by 0.2 percentage points to 3.4% in January and by a further 0.2 percentage points to 3.2% in April. In its most recently updated October forecast, the IMF anticipates growth of 3.1%.

China, Russia, and Brazil, once regarded as beacons of hope and drivers of growth, increasingly emerged as problem countries for the global economy. With China undergoing a period of upheaval, Russia remained mired in recession, and Brazil teetered on the brink of recession. Nevertheless, the global economy as a whole continued to expand, albeit with a further deceleration in the rate of growth.

From spring onwards, the more cautious projections issued by the IMF were also based in part on concern about the United Kingdom's impending exit from the European Union.

In April, the IMF was still anticipating stable growth of 2.4% in the USA. At this point, the organization's experts were already anxiously monitoring the political debate in the lead-up to the presidential elections, including suggestions that global and regional trade deals might be abandoned. As the debate progressed, the IMF observed that the focus was turning inwards with a risk of protectionism. This was exacerbated over the summer by weaker than anticipated statistics that led the IMF to scale back its 2016 forecast by a substantial margin to 1.6%.

In spring 2016, the IMF forecast moderate economic growth of 1.5% in 2016 for both the eurozone as a whole and for Germany, with growth prospects in Europe hampered by continuing high unemployment and a reluctance to invest. Subsequently, however, in response to a generally more robust performance in the region, the IMF increased its forecast for both the eurozone and Germany by 0.2 percentage points to 1.7%.