Commerzbank AG

Commerzbank Economic Research expects a solid economic growth of 1.7 percent for 2014 in Germany following just 0.4 percent in the current year. According to Commerzbank economists, the euro zone has turned a corner in the sovereign debt crisis, and will grow in 2014 for the first time in three years. However, with a growth rate of 0.9 percent, the euro zone will remain far behind Germany, with France and Italy likely to disappoint.

Today at the launch of economic forecasts in Frankfurt, Commerzbank Chief Economist, Joerg Kraemer commented: "The upswing in Germany is widely supported with growth in investments, exports and private consumption." However, growth will be fuelled more and more by the zero interest rate policy of the European Central Bank (ECB). "Even if consumer prices rise only moderately, it must not be ignored that the loose monetary policy gives stock markets and housing prices in Germany an artificial boost," said Kraemer.

The main risks for the economy arise from the gradual exit of the U.S. Federal Reserve from its ultra-loose monetary policy. In Germany, the roll back of the successful reforms of ‘Agenda 2010’ may negatively affect economic growth but only several years in the future, according to Kraemer. For 2015, he expects a GDP growth rate of two percent for Germany while the euro area may achieve just half as much growth.

In contrast, the U.S. is expected to return to its former strength, with growth rates of 2.8 percent (2014) and 3.0 percent (2015). "America has helped itself out of the crisis. Now, the economy is free to pick up speed," said Kraemer. This also allows the Fed, as the first major central bank, to exit from the ultra-loose monetary policy and to reduce the purchases of government bonds in the spring. This will help the dollar against both, the euro and the yen.

The world economy will benefit from a greater contribution to growth from the United States. China is expected to grow by 7.5 per cent in 2014, almost inline with current levels, and to enter a path of sustainable economic development. Nevertheless, other emerging markets may have problems adapting to rising interest rates. "Emerging-market currencies are likely to see the turbulent years returning," Kraemer said.

According to Commerzbank, investors should cautiously consider further investment in the equity markets. "It is not too late to jump on the train," said equity strategist Andreas Huerkamp. He continued: "It is likely we will see an increase of price fluctuations in 2014 as a result of a gradual exit of the Fed from its ultra-loose monetary policy." This in turn offers investors the opportunity to take advantage of more favourable entry prices to buy stock after setbacks. Fundamentally, DAX stocks remain attractive with an average dividend yield of 2.8 percent, and as 18 of the 30 DAX companies may uplift their dividends. Huerkamp expects the Dax in total to rise to 10,200 points by the end of 2014; in the meantime sporadic corrections to a level at 8,800 points are possible.

Press contact:
Thomas Bonk                   +49 69 136 22373                t.bonk@commerzbank.com

Forecasts by Commerzbank Economic Research
Real GDP growth in % compared to the previous year 

	2013	2014	2015
Germany	0.4	1.7	2.0
Euro zone	-0.4	0.9	1.0
- France	0.2	0.5	0.7
- Italy	-1.7	0.2	0.4
- Spain	-1.2	1.0	1.5
U.S.A.	1.7	2.8	3.0
China	7.7	7.5	7.0
US-Dollar (by end of the year)	1.35	1.28	1.21

About Commerzbank

 Commerzbank is a leading bank in Germany and Poland. It is also present worldwide in all markets for its customers as a partner to the business world. With the business areas Private Customers, Mittelstandsbank, Corporates & Markets and Central & Eastern Europe, it offers its private and corporate clients as well as institutional investors the banking and capital market services they need. With some 1,200 branches Commerzbank has one of the densest branch networks among German private banks. In total, Commerzbank boasts nearly 15 million private customers, as well as 1 million business and corporate clients. In 2012, it generated revenues of just under EUR 10 billion with approximately 56,000 employees on average.