Deutsche Telekom AG - The 2009 financial year

The economic environment. World economy starting to stabilize // Intense competition in the markets Global economic development. By the end of 2009, the financial and capital markets had begun to stabilize, helping the global economy to recover from the severe recession witnessed in the first few months of the year. The measures adopted to support the banking sector, along with the highly expansive monetary and economic policies in most industrialized and emerging nations helped underpin a rapid recovery of the production and trade sectors. Compared with the previous quarters, global production had already picked up by the second and third quarters of 2009 and, according to estimates by the Kiel Institute for the World Economy (IfW), was growing at an annual rate of around 4 percent. The International Monetary Fund (IMF) also expects the global economy to grow by 3.9 percent in the 2010 financial year. Unlike previous economic recoveries, the timing and geographic spread of the upturn varied enormously in 2009. In the emerging Asian nations in particular, led by China, production began to expand again at the start of 2009. Growing demand in Asia then helped kick-start the global economy in early 2009. Throughout the course of 2009, the upturn gathered momentum in more and more countries. In the second quarter of 2009, the real gross domestic product (GDP) had already increased in a number of countries while some industrialized nations were still experiencing a sharp contraction of production in various areas. In the third and fourth quarters of 2009, there were only a few countries where the economy did not expand compared with the previous quarters. In 2009, the development of GDP varied considerably across the euro zone. According to the IfW’s latest forecasts, the euro zone economy whose production had recovered most strongly by the end of 2009 was Slovakia; Slovenia, Austria and Portugal also recorded significant increases in production. GDP in the United States has also been growing since the third quarter of 2009; the very significant increase of 2.8 percent was the result of expansion-oriented economic policies and was mainly driven by private consumption. Among the larger national economies in the euro zone, Germany and Italy in particular recorded low-level growth in the second half of 2009, whereas production declined once more in Spain and Greece, for example. Seen over the entire year, the decrease in production was considerable in some industrialized countries. According to the Federal Statistical Office, provisional GDP figures for Germany in 2009 were down 5 percent on the previous year. Estimates put the decrease at 4.0 percent in the national economies of the euro zone overall, 3.3 percent in euro zone accession countries, and 4.6 percent in the United Kingdom. The decline in GDP in the United States is currently estimated at 2.5 percent. Unemployment rose sharply in most industrialized countries in 2009, particularly in the United States, the United Kingdom and several euro zone economies. The German national economy is a positive exception, where unemployment increased only moderately thanks to the widespread intro- duction of short-time work. The finance sector is still not fully stabilized, which is one of several signifi- cant risks facing the global economy. The restricted access to credit could rob the worldwide increase in production of its momentum. Moreover, the global economy may well face additional pressures as governments abandon their expansionary monetary and financial policies or existing programs run their course. Should governments decide to pursue a neutral monetary policy for the coming years and should high budget deficits force them to put their financial policy firmly on the consolidation track, inflation expectations could increase and capital market interest rates could rise quickly and slow any economic recovery. The sharp rise in unemployment in industrialized countries may lead to demand-induced risks in the production and trade sectors in particular. Thanks to moderate pay rises the increase in labor costs has been curbed, but the continuing rise in unemployment may provoke marked cut-backs in private consumption. 66