Anticipated development of business and general conditions
The economic performance of Rentenbank mainly depends on the prevailing conditions in the credit and financial markets, which are, in turn, decisively influenced by the monetary policy of central banks, the development of prices and currencies, and the development of public finances.
Macroeconomic outlook
The International Monetary Fund (IMF) expects global economic growth of 3.3% in 2025, which is below the long-term average of 3.7%. For Germany, however, the IMF predicts a significantly lower year-over-year increase in gross domestic product (GDP) of only 0.3% compared to 2024.1
The longer-lasting phase of economic weakness can be expected to impact unemployment and therefore dampen private consumption. Although German exports could potentially benefit from growing sales markets, they could also be threatened by rising protectionism. On the other hand, lower financing costs could have a positive effect on capital investment activity. According to the Bundesbank, however, Germany must contend not only with economic headwinds, but also with structural problems.2
The rate of inflation will presumably normalize further in 2025. According to the Bundesbank, the rate of increase tracked by the Harmonised Index of Consumer Prices (HICP) will remain nearly unchanged in 2025, with an annual average of 2.4% after 2.5% in the preceding year.3 However, this value is still above the 2% target set by the European Central Bank (ECB).
In view of the lower inflation rates and potential further interest rate cuts by central banks, Rentenbank anticipates a more-or-less sideways movement of long-term interest rates accompanied by continuing volatility in the further course of the year. Whereas subdued economic growth would tend to imply falling interest rates in the capital markets, we anticipate structurally higher risk premiums at the long end of the yield curve.
Outlook for the economic environment for promotional activity
Investments in agriculture and food and therefore also the demand for special promotional loans are influenced by many factors, one of which being the development of general economic conditions, which influences demand and prices in the agricultural markets. However, agricultural investment propensity is also heavily influenced by political and legal framework conditions, as well as public-sector promotional support.
The current situation of animal epidemics (foot-and-mouth disease, African swine fever, bluetongue disease) creates a considerable degree of forecast uncertainty. The Association of Chambers of Agriculture (Verband der Landwirtschaftskammern, VLK) expects lower revenue for most agricultural enterprises in fiscal year 2024/25. If the epidemic situation does not worsen further, only cattle farmers can be expected to benefit from more positive general conditions.
However, the VLK expects that the markets and economic situation of agricultural enterprises will normalise after the market turmoil caused by the coronavirus pandemic and the beginning of the war in Ukraine.4
The “Rentenbank Agriculture Barometer” survey commissioned by Rentenbank provides insights into the current and future business situation of farmers in Germany. According to the latest survey results from December 2024, the assessment of the future economic situation and investment propensity in agriculture has risen modestly from the low level registered in the September survey. Particularly dairy farmers and cattle farmers take a somewhat brighter view of their future economic situation than other kinds of farmers. Agricultural enterprises anticipate adverse effects particularly from agriculture policy and bureaucracy.5
The business expectations of food industry enterprises are much better than they were in the previous year. Nonetheless, uncertainties remain with respect to the future energy supply, economic conditions, and consumer decisions.6
Rentenbank expects additional growth impetus in the renewable energy sector. The German federal government intends to accelerate the expansion of renewable energy and increase its share of gross electricity consumption to 80% by the year 2030. Wind power in particular will make a decisive contribution to this goal. The German Wind Energy Association (Bundesverband Windenergie, BWE) expects a further increase of up to 5.3 GW in gross wind energy capacity in 2025.7 The German Solar Industry Association (Bundesverband Solarwirtschaft, BSW) also expects further market growth in the next two years. However, the BSW believes that attractive and reliable regulatory conditions are an essential prerequisite for continued investment in this sector.8