MILLIRE_2019_Annual Report

Milli Re Annual Report 2019 41 Activities and Major Developments Related to Activities Financial Status Risks and Assessment of the Governing Body Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Consolidated Financial Statements Together with Independent Auditors’ Report Thereon General Information Financial Rights Provided to the Members of the Governing Body and Senior Executives Research & Development Activities ECONOMIC OUTLOOK In 2019, global economic growth rate has slowed down The deceleration in global economic activity, which has given its first signals in 2018 by deepening particularly in manufacturing industry, dispersed into many countries. High geopolitical tensions together with the protective trade policies which triggered global trade wars, adversely affected the investors’ risk perception and caused investment expenditures to deteriorate globally while increasing the pressure on growth. Albeit losing some momentum in 2019, US economy outperformed the expectation set at the beginning of the year and achieved approximately 2.9% growth. The inflation remained below 2% target rate while recovery in labour market kept prevailing and consumer expenditures remained at modest levels. By contrast, as a result of ongoing uncertainty about the Brexit process in 2019 and slowdown in the global economic activity, European economy remained subdued throughout the year and with 1.2% the lowest growth rate for the last 6 years was registered. Economic growth rate for China continued to decline in 2019 as trade measures took a toll on export activity while domestic demand started to weaken. As a result of the country specific conditions, growth performances in emerging countries showed significant differentiations and the 3.8% growth rate for 2018, is forecasted by the IMF as 2.9% for 2019. Central Banks pursued expansionary policies As inflation remained subdued as a result of the protectionist trade policies, weak demand conditions and commodity prices remaining at modest levels, central banks loosened their monetary policies. US Central Bank (Fed), after 11 years, started interest rate cuts by 25 basis points in July followed by September and October meetings and kept policy interest rate between 1.50%-1.75%. On the other hand, European Central Bank (ECB) resumed asset purchase program as well as reduced interest rates. Central banks of many developing countries, Asian countries in particular but also including Brazil, Russia, China, India and Turkey reduced interest rates in order to support the economic activity. In 2019, global capital flows fluctuated as a result of the concerns regarding trade wars, changing monetary policies and the rising geopolitical risks. IMF projects the global growth rate as 2.9% in 2019. 2.9% High geopolitical tensions together with the protective trade policies which triggered global trade wars, adversely affected the investors’ risk perception and caused investment expenditures to deteriorate globally while increasing the pressure on growth.