Roland berger economic_scenario_2012_20120310

THOUGHTS
Economic scenario 2012
We did it:
3% growth in 2011.
Once again, the German economy
came out on top.
But while the prophets of doom
are back at the start of 2012,
we remain confidently
optimistic.
Here is our 3x3* scenario

*
"Three times three" stands for three
consecutive years of at least 3% GDP
growth. This is our forecast for the
German economy. We were right twice
already: 3.7% in 2010 and 3.0%
in 2011. And we are convinced that
we will make it again in 2012 –
contrary to all current forecasts.

THOUGHTS
Economic scenario 2012

A LOOK BACK:
WE HAVE ISSUED REGULAR
FORECASTS SINCE THE
GLOBAL ECONOMIC CRISIS
OF 2008/09
ROLAND BERGER STRATEGY CONSULTANTS Roland BeRgeR STraTegy conSulTanTS Roland BeRgeR STRATeGy cOnSulTAnTS

CONTENT conTenT cOnTenT
Fresh thinking for decision makers Fresh thinking for decision makers Fresh thinking for decision makers

Three questions Developments in "Three times three
20 09
U P D AT E
: A P R IL the world - u p d a t e 2 0 1 0 percent" | Our 2011
SCENAR
IO
SCenar
io ate
on the crisis: economy io u p d
Scenar
How deep? | How long? | in 2010 | The effects of optimistic scenario
And how quickly will the the crisis so far | Seven for Germany | Recovery
economy bounce back?| parameters determine is well underway | Just
We tell you what to watch future outlook | Four like we said | And it will
out for and provide key issues remain on continue until 2012 |
recommendations.| corporate agendas If not longer!
FeBRUaRY 2010

FeBRuaRY 2011
MÄRZ 2009

ECONOMIC ECONOMIC ECONOMIC
SCENARIO SCENARIO SCENARIO
2009 2010 2011
OUR FORECAST: OUR FORECAST: OUR FORECAST:
Rapid recovery of the The German economy can Undeterred by turbulence on
German economy after the grow by at least 3% p.a. the capital markets, the real
global economic crisis: for 3 years in a row economy stays on its growth
Our V-curve scenario trajectory
ACTUAL
ACTUAL DEVELOPMENT: ACTUAL
DEVELOPMENT: 2010 and 2011 proved DEVELOPMENT:
V-curve happened as us right – 2012 is still a This forecast has so far also
predicted question mark proved correct

4 THOUGHTS Economic scenario 2012

AUTHORS:
Burkhard Schwenker
Tobias Raffel

Economic scenario
2012
WE DID IT: 3% GROWTH IN 2011. ONCE
AGAIN, THE GERMAN ECONOMY CAME
OUT ON TOP. BUT WHILE THE PROPHETS
OF DOOM ARE BACK AT THE START OF 2012,
WE REMAIN CONFIDENTLY OPTIMISTIC.
The German economy grew 3% in 2011. The good news economy has been systematically underestimated. But not
broke just a few weeks ago, clearly underlining what good by us. In 2009, we predicted that the economy would
shape the German economy is in. It's seen over 3% growth experience a V-curve, with a fast recovery following the
in four out of the last six years (2006, 2007, 2010, 2011). big drop in 2008/2009. And that's exactly what happened.
Moreover, since the global economic crisis of 2008/2009, We then forecast growth of at least 3% in 2010 and 2011.
the German economy has been growing faster than that We were right again.
of any other highly developed nation. The figures speak Luck naturally played a part in the high accuracy
for themselves: Average GDP growth in the post-crisis of our forecasts. But right from the outset, we firmly
years 2010 and 2011 was 3.4% in Germany compared to believed in the inner strength of the real economy. We
2.4% in the United States and just 1.7% in Japan. Germany didn't allow ourselves to be distracted by the turbulence
is growing more strongly than the rest of the triad – on the financial markets. We looked at the long-term,
despite the euro crisis. fundamental strengths and weaknesses of the economy
Germany's dynamic growth took almost everyone by and made a conscious decision not to go with the flow.
surprise. Since the 2008/2009 crisis, forecasting institu- We preferred to trust our own methodology (see box on
tions have been adjusting their predictions upward on a page 9) and base our forecasts on what it was telling us.
regular basis – no fewer than 6 times last year. In other Now, we once again present our forecasts – this time for
words, the unique nature and strength of the German 2012 and 2013.

THOUGHTS Economic scenario 2012 5

Our 2012
German economic
scenario:
3% growth
Germany's economy put in a surprisingly healthy The actual questions

1.
showing in 2011. Yet mainstream forecasters are we asked can be
still pessimistic about 2012. Leading forecasting found at the end of
this study

MANUFAC
institutions predict that the German economy
will grow by just half of one percent in 2012 on

TURING
average. We beg to differ. We're sticking to our
"3x3" scenario: three consecutive years of at least

COMPETENCE
3% growth in Germany. We believe that the
inner strength of the German economy, the

IS KEY
momentum for growth carried over from 2011,
global growth potential in the US, Asia and
Russia, and the chance of forging a united
Europe will ensure 3% growth in the German OK, our first argument – the most important
economy in 2012 for the third year running. one – is perhaps a rather philosophical one.
If, at the end of the day, Germany manages only But we put it in first place because it is the basis
2.5% or even 2% growth, our scenario would be on which we build our whole scenario. We are
off the mark – for the first time ever – but it convinced that a country's economic strength
would still be an excellent result for the German and growth potential is revealed by its compa-
economy and for all of us. At the very least, nies. And German firms display a unique
it would be a result worth fighting for. combination of manufacturing competence
In recent weeks, we have looked long and and outstanding management skills.
hard at the growth factors driving the German What makes the German economy strong
economy. We have discussed our findings with – and at the same time sets it apart from the
colleagues and clients around the world. The economies of almost all other industrialized
results of our investigation boil down to seven nations – is its excellent mix of world-leading
key points that support our optimistic 3% major corporations and small and medium-sized
growth scenario. Let's look at them in turn. enterprises (SMEs). No less than 500 German
SMEs are world leaders in their own segments.


04
▼ European management
n schlechteren Ruf als Journalisten. Im Management ist ihr Ruf noch schlechter. Eine Roland-Berger-Studie zum Informations- und Entscheidungsverhalten von Führungskräfteni GERMANY
04 style: More on this in
nd Kollegen, Professoren und Berater, „wirtschaftsfremde“ Familienmitglieder, ja selbst unmittelbare Konkurrenten im eigenen Unternehmen gelten als vergleichsweise glaubwür-

würdigkeit“ nur noch von Politikern übertroffen.
Auszug aus diesem Buch

our publication "Europa führt!"
nagementmodell als Vor- „Wir können also festhalten, dass ne-
EDITION
CEO
ts- und Finanzkrise hat ben der Kurzfristigkeit, der Zahlen-
EUROPA FÜHRT!

e Managementansatz einen gläubigkeit und einer übertriebenen
heuen braucht, im Gegen- Kapitalmarkt- und Finanzorientie-
ärken Europas gehört die
hmen. Dazu kommt die
pas Unternehmen setzen
("Europe shows the way!"
rung als Kennzeichen des „American
Way of Management“ auch das Wer-
tegerüst im Hinblick auf erstrebens-

Available in German only)
n Wettbewerbern ab. Sie werte Ziele und die Selbstsicht der
g proﬁtabler, sind interna- Manager eine wichtige Rolle spielen.
trale Frage dieses Buches Unverblümt formuliert werden die
esser, oder gibt es einen Unterschiede zwischen Amerika und
en europäischen Unter- Europa und damit die Charakteristika
Herausforderungen besser der amerikanischen Unternehmens-
BURKHARD SCHWENKER
führung überdeutlich:

her: Wir Europäer sind her- Händler- vs. Handwerkerkultur,
nft erfolgreich zu stellen Gewinn und persönlicher Reichtum
CEO

erung, gerade auch, was vs. das Streben, etwas Bleibendes
ärkeren Verankerung un- zu schaffen, Shareholder return und
chaft, mit einem breiteren
olg und vor allem mit un-
notwendig ist, um Urteils-
n zu erlangen.
Europa führt! „proﬁt per share“ vs. langfristige
Strategien, Leadership und persön-
liche Hybris vs. Management und
soziale Kompetenz.

yer für die „europäische
PLÄDOYER FÜR EIN Die Reihe ließe sich fortsetzen, damit
und politisch leistungs-
nsere Unternehmen ihre
ERFOLGREICHES wird deutlich, woran und warum der
„American Way of Management“ ge-
en. Wenn wir Europäer
n wollen, müssen unsere MANAGEMENTMODELL rade jetzt gescheitert ist und abgelöst
werden sollte.“
sammenwachsen – dazu

6-4

Another 1,000 companies occupy second or

2.
third place in international markets. Our
companies enjoy excellent management, are

A GOOD
flexible and are the world's best at offering
distinctive products. They often have decentral-

SPRINGBOARD
ized structures that help them understand their
local markets better. They think long term and

IS GIVEN
many of them do not bow down to the false
American idol of "shareholder value". In other
words, they employ a ▲ superior European style
of management – an approach whose substan- Our second argument is considerably more
tial benefits we will reap in years to come. tangible. Even if GDP decreased slightly in Q4,
Growth potential is all about sustainable we believe that the surprisingly positive figures
growth. And sustainable growth is feasible only for 2011 as a whole will feed into continued
if companies can reconcile their growth to the growth in 2012. Standard indices support our
great challenges facing the planet: climate argument: The GfK consumption climate index
change, scarce resources and demographic has climbed noticeably since October (from 5.2 to
change. That is to say, if they can create growth 5.6 points), as have the ifo business climate index
out of the way they deal with scarce resources. (from 106.5 to 108.3 points) and the German
We need manufacturing competence so that we Purchasing Managers' Index (from 49.1 to 50.9
can balance limited resources with faster points). These developments will give positive
growth in productivity – through smart impetus for consumption and domestic demand
production systems, automation, "green tech" – as long as we don't sow insecurity in people's
and energy efficiency. In other words, by minds by constantly talking the economy down.
achieving a smart combination of mechanical Indeed, there's no reason for doom and
engineering, plant construction, electrical gloom. Germany is on a growth trajectory.
engineering and high-end technical services. Here are the facts, in brief:
Germany is particularly strong when it comes
to doing just that. Accordingly, we believe that
➞ German exports passed the EUR 1 trillion
mark in 2011, up 11.4% or EUR 108 billion
our manufacturing competence will continue to on 2010,
deliver significant growth potential in the
future. More on this later.
➞ Retail grew by 2.8%, the biggest leap in
20 years,
➞ German industry experienced its second-
best year since German reunification, up 8% on
2010. The weak euro will continue to help here,
➞ Unemployment in Germany fell to 7.3%
with more than 41 million people working,


GERMANY

up 535,000 on the previous year and the highest public sector layoffs, which saw the demise of
level since 1990, more than 600,000 jobs due to budget cutbacks,
➞ Inflation is running at a manageable 2.3%
and the price of raw materials remains moder-
are slowing down. At the same time, in January,
243,000 new jobs were created in the private
ate for the moment. sector. More importantly, with an eye to the
➞ And: not even all the crises and catastro-
phes of 2011 – the debt crisis, turbulence on
future, Paul Volcker's call for Americans to "get
back to the belief that we can produce something"
the share markets, the Fukushima disaster and appears to have hit home. The Detroit Motor
Germany's decision to pull out of nuclear Show, for instance, showed evidence that America
energy – have been able to shake the stability is successfully reindustrializing its economy.
of the German economy. Quite a remarkable We believe that the United States has the
achievement, and one more reason to start the potential to grow by at least 2.5% in 2012.
new year in an optimistic frame of mind. Other forecasting institutions are beginning to
revise their growth predictions upward, which

3. only strengthens us in our conviction. The
current Consensus Forecast (an average of

AMERICA leading forecasting institutions) is that the US
economy will grow by 2.2%, or 0.3 points

WILL higher than the figure predicted three months
back. UBS also recently raised its forecast for

RECOVER the first quarter of 2012 from 2.0% to 2.2%.

Our third argument has to do with export 4.
CHINA
markets. Germany's manufacturing competence
and its good springboard will translate into 3%

WILL NOT LET
growth only if the markets where we sell our
goods and services are open, flexible and

US DOWN
growing – or at least picking up. This means that
the United States is our starting point. Now, the
US economy is arguably not as important for us
these days as it used to be. For example, in 2008 Just as important as the US these days is China.
two thirds of global economic growth was Many analysts are warning of an impending
attributable to the US, while today that same real estate crisis in China. Some even say the
amount is due to BRIC countries. But that's not crisis is already happening. There are reports of
the whole story by any means. America still job losses and a general overheating of the
sends out important signals for global growth, economy. At the same time, growth in the
and the EU/US market is – and will no doubt fourth quarter of 2011 was almost 9%, much
remain – one of the biggest in the world. higher than many were expecting. We believe
Together, we account for 42% of world GDP. that the forthcoming changes in the Chinese
We believe that in 2012 and beyond, America politburo will have a positive rather than a
will stimulate growth. Many analysts are arguing negative impact on the economy and will lead
that the presidential election campaigns will block to further growth. There is still plenty of money
any growth initiatives. However, current develop- available for fresh economic stimulus programs.
ments – particularly on the all-important job Indeed, whatever happens on the political
market – are positive: unemployment fell to 8.3% front, we still believe that the current five-year
in January 2012, its lowest rate in three years, and plan, with its focus on modernizing industry,


OURSCENARIOS AS ENTREPRENEURS
METHOD:
We are not an economic think tank and take a different approach to
forecasting: Instead of relying on econometric models, we use
scenarios that reflect our entrepreneurial experience on global markets –
CREATE

123 4 5
and in doing so we consciously challenge the mainstream.

SYSTEMATIZE DEFINE QUESTION THE ANALYZE AS FORMULATE
FORECASTING MAINSTREAM MAINSTREAM ENTREPRENEURS SCENARIOS

First we systemati- We then use them to The third step is to conscious- We take the entire picture Finally, we develop our
cally compile various define the mainstream: ly seek out arguments and created by impressions own opinion based on this
facts, figures and we identify averages data that contradict the and figures and ask our analysis and formulate a
opinions provided by using existing forecasts mainstream. Here we use consulting experts around scenario we believe to
others. and cite representative "symbolic" developments and the world to examine it. be likely. This scenario is
expert opinions. impressions, such as China's They know their clients, based on our qualitative
Expo 2010, which really industries and markets assessment and under-
showed off the country's inside and out and can pinned by selected
strength. We also look to incorporate personal views quantitative values.
products lauded at trade from select clients.
fairs, persuasive political
visions and much more.

stimulating domestic markets and developing Germany. Growth forecasts for Japan are higher
"green" issues, is on the right track. To achieve than they have been for years. The Fukushima
these goals, China needs manufacturing catastrophe, despite its many fatalities and the
competence – which we in Germany have in countless others who were affected by the
abundance. So German companies continue to tragedy, was a major jolt to the country. It has
enjoy tremendous opportunities in China. For led to a new self-perception and self-awareness
our 3% scenario to come true, China needs to in Japan that could easily translate into faster
grow at a rate of "just" 7.5% to 8%. We actually growth. South Korea is another important
believe that it will do rather better, maybe even player. Here, Samsung has just announced one
hitting 2011 levels. of the biggest investment programs ever: more
Even if, for whatever reason, growth does than USD 41 billion this year alone.
slow down in China, we believe that other
Asian countries have the potential to step in to
fill the growth gap, at least partially, and create
additional growth. These countries are ASEAN
members Vietnam, Indonesia, Thailand and the
Philippines – but also Japan, the fourth-biggest
economy in the world after the US, China and


GERMANY

5. 6.
RUSSIA, THE MACRO
BRAZIL AND ECONOMIC
INDIA SETTING
WILL PLAY WILL REMAIN
THEIR PART STABLE
Our fifth argument relates to the other BRIC Our first five arguments for a positive economic
countries. Our optimistic 3% economic scenario outlook relate primarily to regional growth
relies on fast growth in these countries, creating potential for Germany. Before we move on to
opportunities for German firms. The prospects Europe – our most difficult argument – let's
for growth look good: take a quick look at the other factors that
➞ Russia is finally back playing an important
role for German business. Last year, exports
underlie our optimistic 3% forecast: no credit
crunch, no new protectionism, no exploding
from Germany to Russia rose by nearly 32%, to raw materials prices. We are confident that all
more than EUR 30 billion. Russia's joining the these threats can be avoided. Here's why:
WTO means even greater opportunities for us.
Whatever the political situation, we believe that
➞ There is currently no sign of a true credit
crunch. The central banks have at last made
Russia will contribute to our growth in 2012. enough cheap money available to the markets and
➞ Brazil is hosting two major upcoming
events: the soccer World Cup in two years' time
there is no evidence that well-managed companies
are having any difficulty securing financing on
and the Olympic Games in 2016. The associated acceptable terms. Further bank failures, which
investments in infrastructure and technology destroy confidence between market participants
will give a positive boost to German companies. and cause the flow of money to rapidly dry up,
➞ Last year, India grew by 7.6%, faster than are unlikely at the present time.
many were expecting. We believe it will grow
by at least 7% in 2012. Germany's ever closer
➞ One undeniable danger is that 2012 will
see new trade barriers being set up, hindering
involvement in India means more growth global trade and international cooperation. Last
potential. There is certainly a solid platform year, the number of such barriers grew by 53%
for further growth, as summarized by the according to the WTO. Recent examples include
Indo-German Chamber of Commerce's motto Mercosur's 30% tax increase on imported cars,
for this year – "India and Germany: Infinite China's momentous self-imposed restriction on
opportunities". the export of rare earths, the battle between
the EU and the US over subsidies for Airbus and
Boeing, and China's punitive duties on US cars.
A trade war between China and the US would
have immense ramifications for the global
economy. Fortunately, such a trade war is
highly unlikely. The threats we have heard in
this direction in 2012 – a year in which both


+3.7% +3.7%
2006 2010

+3.3%
2007

+3.0%
+3.0% 2011

+1.3%
2008

0.0%

3% GROWTH OR
MORE IN 4 OF
THE LAST 6 YEARS
GERMANY'S GROWTH RATES
FOR THE LAST 6 YEARS
Germany passed "our" 3% threshold four times

2009 –5.1%

OUR "MOOD
BUSINESS
SITUATION AS OF BAROMETER"
FEBRUARY
2012 THE ROLAND BERGER BUSINESS INDICATOR
80%* of our more than 200 Partners worldwide rate the current
situation on their markets as average, good or very good.
And the picture for the coming months is even better:
Very good/good 92%* assume that business will remain stable or improve.
34%

BUSINESS EXPECTATIONS
FOR MARCH TO MAY

Better
Average 32%
*80% 46%

Stable
Poor/ 60% *92%
very poor
20%

Worse

8%

100%

GERMANY

countries may see changes in their national
leadership – are chiefly due to campaign
➞least a the introduction of the ESM, there
is at
With
chance that a proper insolvency
politicking. code will be drawn up for European countries.
➞ Raw materials: In recent months, oil, gas,
steel, copper, aluminum, zinc and other raw
Witness the planned strengthening of the
Commission's role in national budgetary
materials have not been in short supply, nor questions and the new function of the Euro-
have their prices risen greatly. We believe that pean Court of Justice.
over the coming 12 months, the prices of raw
materials will remain within the ranges seen in
➞ We are seeing the beginnings of an
"economic government of Europe", or whatever
recent years. As such, they should present no name it will ultimately go by. At the very least,
obstacle to the development of the German today it is no longer politically incorrect to talk
economy. Oil currently costs USD 116 a barrel, about closer European integration, as it was just
a good USD 30 (20%) below its peak price in a few months back. That is perhaps the biggest
recent years (USD 145 in June 2008). So even if sign of progress.
the price of oil were to go up, the global
economy would not come apart at the seams
➞ Finally, the chances of a European rating
agency being set up are growing. We have made
overnight. Of course, we do not know at present significant progress on this in recent months. If
whether the Iran crisis will escalate. But most nothing else, it is important as a visible symbol
geopolitical forecasts assume that such an of a new European identity.
escalation – the impact of which would, of We believe the timing of these points is less
course, go far beyond the oil price – is unlikely. important than the dedication and conviction
with which they are implemented. It seems to

7. us that now, at long last, they are being dealt
with in a serious and determined fashion. Of

EUROPE WILL course, further compromise will no doubt be
necessary given the complexity of the required

RESOLVE ITS regulatory framework. The coming summits
will show how successful we are in launching a

DEBT CRISIS new growth policy for Europe. And we believe
that growth is what is needed first and foremost
to help those countries at risk, such as Italy,
Our final argument for our 3% forecast is the Spain and France. That means an aggressive
most difficult one of all: Europe. Regional monetary policy and an acceptance of higher
growth and manageable raw materials prices inflation rates. It also means the EU deciding to
will be no good to us if we cannot get Europe revitalize its internal market again to provide
and the debt crisis under control. The situation fresh growth stimuli. Mario Monti's report to
remains complex and intricate. But we believe the Commission two years ago can serve as the
that Europe will manage to find a solution, for blueprint. In it, he addresses all the relevant
the following reasons: points: transportation systems, digitalization, a
➞ The eurozone bailout funds – the EFSM and
ESM – should fully come into their own by the
free market for industrial and business services
and freedom of movement for workers, coupled
middle of the year, as planned. In any case, the with the gradual integration of Europe's social
recent downgradings by rating agencies do not security systems.
appear to have brought countries to their knees: We are fully aware that Europe – and the
France and Spain recently secured cheap new euro – are not out of the woods yet. But we are
money and the stock markets remain cautiously also convinced that the situation can be turned
optimistic. to good only if we start thinking and talking


▼ Europe's culture of
Burkhard Schwenker
Thomas Clark craftsmanship and consensus:
More on this in our upcoming
The publication "The European Way"

European
Way
A Culture of Craftsmanship and
Consensus as Beacon for the
Global Economy of the 21st Century

differently about Europe. We need to drop the These are the seven points underlying our
unconvincing message that there is no alterna- optimistic economic forecast. As we said at the
tive to Europe, an idea that generates neither outset, we believe that the inner strength of the
optimism nor empathy. Instead, we need to German economy, the beginnings of an
fashion a new European identity and recognize integrated Europe, the positive momentum
our European strengths. Two such strengths are carried over from a strong 2011 and the growth
fundamental and underlie our optimistic potential for our companies around the world
forecast: ▲ our culture of craftsmanship and our – in the US, Asia, Russia and Brazil – mean that
culture of consensus: Germany can achieve 3% growth in 2012 for
➞ By a culture of craftsmanship, we mean
that Europe strives to create something lasting,
the third consecutive year. One further
argument in support of our forecast for 2012
sustainable and enduring – not just for the sake comes from our own barometer, the Roland
of short-term success and personal wealth. Berger Business Indicator (see box on page 12).
Craftsmanship lies at the heart of our manufac- When asked about the current business
turing competence, not just in Germany but situation in February 2012 and their business
also in France, Northern Italy, Scandinavia and expectations for the coming three months, the
Eastern Europe. overwhelming majority of our 200+ Partners
➞ And our culture of consensus? It is easy
enough to call for clearer decision-making,
around the world were decidedly upbeat. Some
80% said that the current situation in their
stronger leadership – an approach typical of markets was average, good or very good. As
the British and American business worlds. many as 92% thought that business in the next
But assigning all authority to a single body or three months would be stable or show further
individual within an organization comes at a improvement. That's the most positive result
price: the risk of oversimplifying matters, shown by our indicator since we introduced it!
polarizing people, underestimating dangers
and skirting around issues. Achieving consen-
sus is a time-consuming, wearisome process
that offers fewer opportunities for individuals
to take center stage. On the other hand, it has
the potential to deliver long-lasting solutions
and improvements. Consensus leads to
inclusion rather than exclusion, sustainable
solutions rather than stopgap measures.
Focus on these fundamental strengths
– European values, our manufacturing compe-
tence, our (superior) management skills, our
culture of craftsmanship and consensus –
and the picture of Europe that emerges is more
positive than some seem to think.


EUROPE/GLOBAL ECONOMY

Europe and
the global economy:
Our outlook for
2012
So far, our attention has focused on Germany. In and around 5% in the rest of Africa. We are
discussing the strength of German exports, we more optimistic about Japan, however, where
have also touched on major regions of the world. we predict around 2% growth thanks to the
But what about the global economy overall? And new dynamism driving the economy.
will Europe as a whole grow this year? If so, Predicting whether Europe will see
by how much? Here are the arguments we've growth overall is most difficult of all, of
presented so far: course. For Germany, we base our forecasts
on the fact that Germany's above-average
➞ The US economy is picking up. With the
current recovery in the job market and continuing
manufacturing competence means that it
stands to profit more than other countries
reindustrialization, we believe a growth rate of from global growth. When it comes to Europe
2.5% is possible. as a whole, the picture is more complicated:

➞ The BRIC countries are also looking good. ➞ France is key to Europe's overall growth.
China will achieve at least 8% growth with the Economic research institutions currently expect
help of its current five-year plan and the related France to stagnate. However, the country's
modernization of its economy. We expect to see underlying manufacturing competence and the
7% growth in India and at least 4% growth in fact that it is drawing noticeably closer to
Brazil, in the latter case thanks to the upcom- Germany's economic policies lead us to believe
ing major events to be held there. Russia should that it may do better than predicted. In fact, we're
also manage a good 4% growth following its forecasting 0.5 to 0.75% growth this year in
accession to the WTO. France – bearing in mind that upcoming election
campaigns may lead to a change of direction.
➞ For are generally in outside Europe, of the
forecasts
other countries
line with those
our

IWF: good 5% growth in ASEAN countries,
nearly 4% in Latin America (excluding Brazil),
just over 3% in North Africa and the Gulf States


3.0
FORECASTS BY INSTITUTES* OUR FORECASTS
2.5
2.2
2.0
GDP FORECASTS FOR 2012 1.9

1.0

0.5
8.2 0.0
Germany EU USA Japan
> 7.5

7.0 7.0

4.0 4.0

3.3
3.0

China India Brazil Russia

3.0

2.5

0.5 - 0.75
0.5 0.5
0.0 Italy Spain Portugal Greece
n.a.
France -0.4 -0.4 UK Poland

-1.0
-1.3

3.5 - 4.0 -2.8
-3.0 -3.0
* All forecasts are from Consensus, except 3.3
BRIC countries and World (IWF) as well
as Greece, Portugal and Poland (EIU)
Source: Consensus 1/2012, IWF 1/2012,
EIU 1/2012, in-house calculations

World

EUROPE/GLOBAL ECONOMY

➞ It is easier to foresee what the future holds ➞ Northern and Easterncountriesare a will
for countries on the southern fringes of Europe. different ball game. Many
Europe
here
Greece will shrink significantly, come what may, enjoy growth rates of 2% or more. We predict
and Portugal will share a similar fate (-3%). The almost 3% growth in Norway, 2.5% to 3%
forecast for Italy and Spain is decidedly sunnier. growth in the Baltic states, and up to 3%
Thanks to the course currently being pursued by growth in Poland, thanks to its manufacturing
Mario Monti and the manufacturing strength of competence.
the north of the country, Italy could limit its
"negative growth" to just 1%. The new job
market reforms in Spain mean that it may get
➞ The United aKingdom is a special case.
Putting aside for moment the political
away with a decline of just -0.4% (Consensus). discussion with regard to Europe and the UK
(continental Europe's growth potential is not
dependent on the UK), we expect to see
sluggish economic growth (0.5%) due to the
UK's manufacturing weakness, despite the
action that has already been taken on this front.

SUMMARY
We believe that the EU can achieve overall economic growth of around 1% in 2012 – considerably
more than the figures currently put forward by the IWF (-0.5% for the eurozone) and Consensus
(0.0%). This is on the condition that Europe manages to achieve a healthy balance between austerity
and growth, the necessary savings programs and new growth initiatives.
For the global economy, we predict a growth rate of somewhere between 3.5% and 4%, similar
to 2011. That puts us a good half a percentage point higher than other mainstream forecasters. The
reason? We believe that global growth in 2012 – unlike in the past two years, where growth was
driven almost exclusively by the BRIC countries – will be spread more evenly across different regions.


And what comes
after 2012?
Germany needs
Agenda 2020!
Let us conclude our economic scenario by Our country is still benefiting from the funda-
briefly looking ahead to Germany in 2013. To mental change of direction given to labor
make sure we are all on the same page: Most market and social policy. Having said that, most
forecasters expect 2012 to be a difficult year of the (modest) growth stimulus provided by
followed by a return to more powerful growth making it easier to dismiss workers, cut
in 2013. We disagree with the pessimism non-wage labor costs and boost SMEs has now
regarding 2012 – see above! – but do see the been used up – not least because other econo-
danger that the 3% growth rate of recent years mies have become more competitive again at
could come to an end in 2013. Our reasons the same time.
are as follows:

➞ in largelong term,ofadvanced economies
A number empirical studies show THE
CORNERSTONES
that, the
don't tend to grow by much more than around

OF
2%. In other words, the current phase of 3%
growth is unusually good, and probability alone

AGENDA 2020
suggests that this is unlikely to continue.

➞ Mostcrisis inground losthas the global
economic
of the
2008/09
to
now been We therefore see a significant risk that, follow-
regained. While the German economy shrank ing a strong showing in 2012, our current
by 5.1% in 2009, the past two years have growth trajectory could crumble in 2013.
made up for the entirety of this slump. Unless, of course, Agenda 2010 can be replaced
So there is no more catching up to do. by a new Agenda 2020. Just as the EU must now
launch new growth initiatives to revitalize its
➞ Most important of all, thefading noticeably
of the Agenda 2010 reforms is
positive impact internal market (our seventh argument for
growth), Germany too must move swiftly to
nearly ten years after they were introduced. create new opportunities and potential for our


AGENDA 2020

economy. Looking back, Agenda 2010 was spot tive solutions in modern sectors such as
on and singularly important to German high-end green technologies, energy and
economic development. Yet even so, the new resource efficiency, mobility and smart produc-
reform project must differ on a number of key tion systems. Thanks to its dual system of
issues. In our view, the following points are the vocational training, Germany also has the
most important: chance to maintain its lead in productivity by
recruiting excellently trained people in the
➞ More growth instead of more flexibility:up
Agenda 2010 centered primarily on loosening
future. The important thing now is for intelli-
gent policies and the right conditions to assist
rigid structures and making the labor market both areas in such a way that we do not lose
more flexible. The focus now, however, must be the momentum seen in recent years. Maybe
on generating fresh stimulus for growth. Ten then 2013 can really carry on where 2012
years ago, we rose to the challenge of fundamen- leaves off and sustain the 3% growth trajectory.
tal changes posed by a flexible global economy.
In the face of dogged resistance, obsolete rules
and practices were overhauled. Today the focus
must be on laying the foundation for further
growth.

➞ market andand new industries instead ofyears
labor
Education
social welfare systems: Ten
the

ago, the labor market and social welfare systems
were at the core of the reforms. However, Agenda
2020 must revolve around two other pivotal policy
areas: education and new industries. One aspect of
this involves at last improving mobility: The influx
of young workers will be a critical topic. Another is
making systematic use of the shift in energy policy
to drive further manufacturing growth. Providing nothing unusual
happens (and we hope it
➞ Collaboration across sectors: The kind of
agenda we are talking about works best when
doesn't!), our next scenario
update should be out in the
summer. In the meantime,
the political and business communities pull let us take to heart the
together – and when other stakeholders such as words of Winston Churchill:
the scientific community and the charitable
foundations play their part too. In education and
IN EVERY DIFFICULT Y."
R&D, many innovative solutions are fashioned at
the point where the government, the economy
THE OPPORTUNIT Y
and the non-profit sector intersect and interact.
The goal of any new agenda must be for specific
THE OPTIMIST SEES
initiatives to reinforce this interaction in a way
that benefits German companies.
OPPORTUNIT Y.
We are convinced that Germany has exactly the
DIFFICULT Y IN EVERY
right capabilities for a new agenda. Going back
to our point of departure, our manufacturing
"THE PESSIMIST SEES
competence creates the conditions for innova-


5
GROWTH
FACTORS:
OUR
CRITICAL
QUESTIONS
(EXTRACT)
1.
EUROPE
DURABLE SOLUTIONS
OR THE CONTINUED
EROSION OF TRUST?

• ill the recent decision to accept
W
European fiscal union (including
stricter budget rules and automatic
sanctions) be rigorously implemented?
• ill the EFSF and ESM turn out to be
W
potent medicine in preventing and
curing critical debt situations?
• oes the EFSF and do larger eurozone
D
countries still need to fear further
credit rating downgrades? If so, will
they have a negative impact?
• ill we see a European insolvency
W
code for sovereign states?
• ill Greece have its debts canceled
W
2.
GLOBAL
ECONOMIC
GROWTH
DRIVERS
WILL BRIC AND THE US
LEAD THE WAY WITH FAST,
FORCEFUL GROWTH?

• Will China grow by at least 7.5% to 8%?

• Will the US manage a sustainable

turnaround on its labor market (or will
the electoral campaign effectively put
all initiatives on hold)?
• Will Brazil create new potential for

growth (4%), especially thanks to the
investments associated with upcoming
(or achieve an orderly exit from the major events (the soccer World Cup
eurozone)? and the Olympic Games)?
• ill the Spanish and Portuguese
W • Will Russia manage 4% growth (by

governments succeed in convincing continuing to modernize and joining the
their people of the need for austerity WTO)?
programs? • Will India maintain its growth trajectory

• ill financial and economic policy
W (7%), or will corruption hinder ongoing
integration within the eurozone development in the long run?
continue (economic government)? • Will post-Fukushima Japan turn the

• ill the European Central Bank keep
W corner and experience fresh and
up its expansive monetary policy? forceful growth (of over 2%)?
• ill the political arena change the tune
W • Can stimulus from the ASEAN countries

of its communication about Europe Indonesia, Thailand, the Philippines
(with a positive, go-ahead message and Vietnam make up for other growth
instead of a dour lack of alternatives)? drivers' shortcomings?
• ill we strike the right balance
W • Will upcoming elections in China, India,

between austerity programs and Russia and France influence global
growth initiatives? growth potential?


LIST OF QUESTIONS

3. 4. 5.
FINANCIAL PROTECT ION RAW
SYSTEM ISM MATERIALS
STABILIT Y AND REFORMS OR NEW BARRIERS OR MORE SIDESHOW OR NEW
A SOURCE OF TROUBLE? OPEN WORLD TRADE? PROBLEM CHILD?

• ill we see a credit crunch or will the
W • ith the WTO stating that barriers
W • Will oil price hikes remain within

financial system be able to fund the harmful to trade increased by 53% in tolerable limits (not exceeding 15%)
investment needed to fuel growth on 2011, will further trade restrictions in the foreseeable future?
reasonable terms? ensue? • Will the Iran crisis escalate? And if so,

• ill trust in banks and financial
W • f the WTO cannot make progress, will
I are there enough ways to quickly
managers be restored? bilateral and regional trade agreements compensate for the loss of Iranian oil?
• o banks' business models work and
D succeed? • Will the growing price differential

are they are crisis-resistant? • hat will be the impact of Russia's
W between Brent (the European reference
• re the currently targeted capital
A accession to the WTO after 18 years of price) and WTI (in the US) lead to an
ratios enough? negotiations? imbalance in growth potential?
• as enough been done to guard
H • ill 2012 election campaigners be able
W • Will politically motivated actions – by

against further write-downs on the to resist the temptation of protectionism? OPEC, Iran or China, etc. – drive raw
treasury bonds of crisis-ridden • ill the climate of negotiations in the
W materials shortages and/or significant
eurozone states? Doha round improve? price increases?
• f the US goes ahead and separates
I • ill the EU countries and the US act on
W • Will the price of other raw materials

commercial and investment banking, their stated intention to dismantle farm (copper, steel, etc.) increase moder-
will the ban on proprietary trading subsidies to the benefit of developing ately, as expected, or is there the
(known as the Volcker rule) be countries? danger of substantial upheavals?
enforced? • ill China, India and other emerging
W • Will the increasing consolidation of raw

• n the medium term, will the Tobin tax
I countries give Western countries easier materials producers negatively impact
on financial transactions apply not only access to the markets for capital goods prices in the short term?
in Europe but throughout the world? and services?
• s further turbulence on the capital
I • ill China impose even greater
W
markets to be expected? And will it restrictions on the export of rare earths?
affect the real economy? • ill the dismantling of trade restric-
W
tions between the US and Europe free
up additional growth potential?


THOUGHTS
EDITOR

Roland Berger School of Strategy and Economics

Roland Berger Strategy Consultants Holding GmbH
Mies-van-der-Rohe-Str. 6
80807 München
Germany
+49 (89) 9230-0
RBSE@rolandberger.com
www.rolandberger.com/RBSE

THE AUTHORS WILL BE GLAD
TO ANSWER ANY QUESTIONS
YOU MAY HAVE

Prof. Dr. Burkhard Schwenker
Chairman of the Supervisory Board
+49 (40) 37631-4100
burkhard_schwenker@de.rolandberger.com

Dr. Tobias Raffel
Senior Expert
+49 (30) 39927-3559
tobias_raffel@org.rolandberger.com

DESIGN

Roland Berger Media Design
FEBRUARY 2012

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