The global economy stabilised slowly in 2014, but hardly achieved any new momentum. According to the International Monetary Fund (IMF), global real economic growth remained unchanged at 3.3%. Growth was, however, relatively mixed overall. While the US, Eurozone and European Union slowly stabilised, growth tended to drop in most emerging markets. Russia and Brazil, in particular, saw negative trend reversals in 2014, but South Africa and China, which recorded high growth at times, also saw growth decline somewhat. Economic growth remained unchanged at around 3.0% in the CEE region. Although the Austrian economy continued to grow slowly at a rate of 0.6% in the first half of 2014, recessionary tendencies were observed in the second half of the year. The Austrian insurance industry achieved above-average premium growth of 3.3% in this macroeconomic environment in 2014.
On the one hand, the region in which VIG operates showed satisfying growth in the VIG core countries of Poland (+3.3%), Romania and Slovakia (+2.4% each) and the Czech Republic (+2.0%). Due to their export orientation, these countries are benefiting from the recovery, particularly in Germany, and the initial effects of national reforms. Momentum is still lacking, on the other hand, in the West Balkan region, especially Serbia (-2.0%) and Croatia (-0.6%). The Ukraine is an exceptional case due to the armed conflicts in the eastern part of the country and the limitations this has placed on economic policy. This has pushed the country into a deep depression that has no short-term solution other than international aid payments.
Further flattening of growth worldwide was also the result of US Federal Reserve policy, which continued to hold interest rates low with further bond purchases. The ECB also continued its policy of quantitative easing. Although this was intended to stimulate investment activity, 2014 once again saw only a limited improvement. The low interest rate environment presents a challenge for the insurance industry, particularly in the area of life insurance.
The Austrian economy suffered from a low propensity to invest combined with falling foreign demand in the second half of 2014. Export sales to Russia, the Ukraine, South America and Italy recorded particularly large declines. The most important global economic trends at the end of 2014 were the beginning of the collapse in oil prices, a number of cases of negative inflation rates and the decline in the euro versus the US dollar. The savings glut also continues, and given the levelling off in production growth, this is a clear indication of weak demand.