The International Monetary Fund (IMF) expects the global economy to grow by 3.1% in 2024, while the Forecast of the Federation of German Industries (BDI) is almost identical at 2.9%. Growth expectations are positively influenced by the increased resilience of the economy in the USA and some other major emerging economies as well as government support in China. By contrast, the slowing recovery from the pandemic and tighter monetary and financial conditions are among the factors weakening development. The high inflation prevailing in many regions of the world is expected to fall in the medium term according to the forecast of the Institute for Economic Forecasts. The IMF's expectation for global inflation is 5.8%.

The EU Commission expects gross domestic product (GDP) in the eurozone to grow by 0.8% in 2024, after the economic forecast of 1.2% was lowered due to the expected turnaround in interest rates. At 2.7%, forecast inflation in the eurozone is lower than expected global inflation. Due to continuing inflation, rising interest rates and construction costs, falling household purchasing power, lower economic growth, higher government debt and falling property prices, the construction industry is forecast to shrink in most EUROCONSTRUCT countries. The sharpest decline is expected in the residential construction sector. According to the Global Construction Monitor of the Royal Institution of Chartered Surveyors (RICS), Europe is the only region that expects a decline in private residential construction in 2024, which is estimated at 11.0%. Renovations are also on the decline. Civil engineering will be resilient due to public investment. Construction of non-residential buildings is expected to stagnate until 2024, while renovations of non-residential buildings are expected to increase slightly.

In our core markets of the Netherlands and Switzerland, GDP is forecast to increase in 2024. Expectations for the core market of Germany are largely in the lower positive range. The Organization for Economic Cooperation and Development (OECD) expects economic output to grow slightly by 0.3%. Conversely, the German Economic Institute (IW) expects GDP to fall by 0.5%. German economic growth will be dampened by the high weighting of energy-intensive industries, the weak global economy and its impact on export companies and increasing uncertainty among companies due to the budget crisis. In 2024, consumption will continue to be held back by high inflation and the rise in interest rates will have a negative impact on the construction industry and investments. However, private consumer spending should recover again due to rising real incomes. Both the German government and the EU Commission are forecasting a fall in the inflation rate in Germany to 2.8% in 2024. These assumptions are almost congruent with the forecast for the eurozone. The Federation of the German Construction Industry expects a real decline in turnover of 3.5% in the entire main construction industry. The reasons for the negative development are the weak performance of the global economy, monetary policy tightening due to high inflation and uncertainty among companies and households as a result of budgetary uncertainties in Germany. In residential construction, the interest rate trend on the capital market is seen as an additional ongoing challenge. According to a report by the Association of German Housing and Real Estate Companies, residential construction companies are being forced to cancel projects to create affordable housing. As things stand, 22.0% of the projects already planned cannot be realized. Slight growth trends are forecast for renovation measures in the residential construction sector, but these can only partially offset the real decline in new residential construction of 12.0%. In commercial construction, the Federation of the German Construction Industry forecasts price-adjusted growth of 2.0%. In line with the low dependency of commercial investments on interest rates and high capacity utilization, stagnation is expected in building construction. This will be offset by an increase in civil engineering. Sales growth of 1.0% is expected in public construction. After some construction material prices, such as the prices of steel, timber and glass, fell until November 2023, the German Construction Industry Association expects material prices to fall overall in 2024. Further price increases are only realistic for individual energy-intensive materials such as cement, as was already the case in 2023.

For the Netherlands, which is also one of our core markets, the EU Commission expects economic growth of 1.1% in 2024. Analysts at Rabobank fear stagnation due to continued high interest rates and persistent inflation. The economic situation will be particularly affected by the new elections in November 2023. One of the greatest opportunities for the Dutch economy is the expansion of strong foreign trade. This is benefiting in particular from the high demand for Dutch goods and services. On the other hand, energy prices could pose challenges due to the Ukraine crisis and trade relations, particularly with Russia. Growth in nominal wages of 4.0%, due to the labor shortage, in combination with an inflation rate of 3.7% forecast by the EU Commission should lead to an improvement in domestic demand in 2024. In the construction industry, however, the Economic and Financial Analysis Division of ING Bank N.V. expects a decline of 2.5% in 2024. Increased interest rates and investor risks in particular mean that the real estate market will develop negatively until the middle of the year. Due to the already existing structural shortage in the residential real estate sector and higher incomes, prices for both existing and new properties will rise by 4.0% in 2024 according to ABM AMRO's forecast in the Housing Market Monitor. The favorable socio-economic and political climate makes the Netherlands attractive for migrants, which is why demand for housing will increase even more in the future. Nevertheless, construction processes and the development of new housing are currently slowing down. The reasons for this are rising construction costs, increasing regulations and lengthy procedures.

The Swiss Confederation is forecasting below-average growth for the Swiss economy in 2024, with adjusted growth of 1.1%. This forecast is based on low growth momentum in the eurozone, which is slowing down the exporting sectors of the Swiss economy. The economy is expected to be supported by private consumption, which is also expected to increase by 1.1%. A weak development is also expected in the area of investment, as capacity utilization is falling and financing costs are rising. Construction investment is expected to grow by 0.9% overall. In the area of new construction, Wüest Partner and Docu Media are forecasting a nominal decline of 0.8%. The decline will be partially offset by an increase of 0.7% in the renovation segment. A decline in demand is expected in the construction materials segment, which will be influenced by supply bottlenecks, increased material costs and uncertainties due to geopolitical events. Increasing population growth in combination with positive developments on the labor market will also exacerbate the ongoing shortage of living space. From summer 2024, an expected interest rate cut could boost construction activity. This will make investments more attractive and reduce financing costs. However, other factors such as geopolitical developments and economic uncertainties will also play an important role in future developments.

The IMF expects moderate economic growth of 0.6% for the UK in 2024. The UK is characterized by uncertainty due to high inflation, high interest rates, the upcoming elections and global factors such as the conflict in the Middle East. The Bank of England will only adjust its interest rate policy when it is confident that inflation will reach the target level in the medium term, which is not expected before the second half of 2024. According to KPMG, the inflation rate will fall to 2.8% in 2024. As interest rates are expected to fall over the course of 2024, the RICS UK Construction Monitor at the end of 2023 paints a less pessimistic picture of the situation in the construction industry compared to the third quarter. The infrastructure segment in particular is leading the way and private non-residential construction is also likely to increase slightly over the course of the year. Due to the current reinforced autoclaved aerated concrete (RAAC) crisis, investments in public construction are likely to increase in order to avoid potential structural deficiencies. In addition to investments in education, the construction industry in the public sector will be positively influenced by investments in infrastructure and healthcare in particular. An average increase of 5.0% is expected for rents in 2024. The same increase will be seen in the cost of specialist staff and materials.

The USA, which we have defined as a growth market alongside the UK and France, will experience economic growth of 2.6% according to the OECD's assumption made in February 2024. After government spending made a positive contribution to growth in 2023, it is assumed that subsidies will decrease in order to reduce government debt. Due to falling inflation, key interest rates are expected to be lowered from around mid-2024. However, the Federal Reserve (Fed) will not cut interest rates until inflation is below 3.0%. Despite high interest rates, there is room for growth in the area of commercial and construction investment. Overall, an increase of 2.0% is forecast for total expenditure in engineering and construction, although this is a significant decline on the growth rates of previous years. In commercial real estate, low lending and potential losses by investors could lead to increased pressure on the sector. The expected decline is greatest for multi-family houses at 15.0%. The estimated 5.0% decline in single-family homes is due to the fact that purchasing is becoming increasingly unaffordable and buying is more expensive than renting in most markets. Due to the rise in interest rates, less will be invested in renovation and refurbishment in the future, which is why a reduction of 4.0% is expected. By contrast, investment in the healthcare sector is expected to grow by 8.0%, which is partly due to the Inflation Reduction Act (legislation to reduce inflation through climate protection and energy security, among other things). Growth of 12.0% could also be realistic in the hotel and accommodation sector. Further government subsidies in the manufacturing industry are expected to lead to an increase, particularly in the data center and semiconductor production sectors.

According to the OECD, France's economy will experience a 0.6% increase in GDP in 2024. The IMF, on the other hand, expects economic output to grow by 1.0%. The Banque de France is forecasting dynamic growth in consumption due to falling inflation and an expected more stable energy price trend. According to the central bank, the inflation rate is expected to fall to 2.6%. Due to high financing costs, major investments such as the purchase of property are being avoided, meaning that a decline in private investment of 5.9% is forecast. The industry association Fédération Nationale des Trauvaux Publics expects a low growth rate of 2.0% for infrastructure and industrial construction, which will mainly come from major projects by civil engineering companies. Due to inflation and high interest rates, the volume of sales in the building construction sector is expected to fall by 5.5%. Demand in residential construction has continued to decline since mid-2023 due to a decrease in building permits. While a decline of 14.6% is forecast in new construction compared to 2023, the market volume in the renovation and maintenance sector will increase by 1.6%. Due to the decline in activity in the construction industry, Bruno Le Maire, Minister of the Economy, announced support measures for construction companies, such as accelerating payment for government contracts.