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1Economic and Competitive Environment2Global Economy3The inflation rate in the Euro area peaked at 10.6% in October 2022; since then, inflation rates 4have fallen steadily. In November 2023, the inflation rate was down to 2.4%, before climbing 5to 2.9% in December (eurostat). However, it was still above the target by the European 6Central Bank. Against this backdrop, the European Central Bank raised its key interest rate 7(deposit rate) from minus 0.5% to 4% in just over a year. At the beginning of 2023, the 8economy was still facing several problems: difficulties in supply chains, the threat of gas 9shortages and a shortage of skilled workers. However, restrictive monetary policy did not fail 10to have an impact. Demand-side problems dominated. In addition to weak private 11consumption due to high inflation, investments, especially into interest-sensitive construction 12investments, were weak. Overall, according to eurostat, the euro area economy has grown 13only 0.5% in 2023, after 3.4% in the previous year.14The US ended 2023 stronger than expected, as tailwinds such as excess savings and robust 15labour markets supported consumption, especially in the third quarter. Inflation rates 16continued to decline from their peaks in 2022, reinforcing expectations that previous policy 17rate hikes are now having their expected effect on the economy. This view is also supported 18by the continued easing of labour market conditions. The Federal Reserve stopped raising 19rates after its July meeting and switched to a data-dependent mode, maintaining its hawkish 20bias. This hawkish bias reflects the remaining uncertainty about the ultimate impact of 21monetary policy on the economy. Still, inflation remains too high to declare victory. At the 22same time, central bankers seem to have shifted to a more balanced risk assessment, taking 23into account the potential unwanted negative effects of past rate hikes on economic 24momentum.25In Japan, the only industrialized country to maintain negative key interest rates, the central 26bank eased its yield curve control in July and October. The upper limit for ten-year yields is 27now at a flexible reference value of 100 basis points. Supported by a recovery following the 28end of the coronavirus protection measures and a weak yen exchange rate, the economy has 29performed solidly and has grown based on preliminary numbers by 1.9% in 2023 (Cabinet 30Office, Japan).31After a strong post-COVID-19 recovery in the first quarter, China's economy slowed rapidly in 32the second quarter as consumer and business confidence weakened amid mounting debt 33problems in the real estate development sector and stretched fiscal and debt positions of 34local governments. The central government stepped up its support for the property sector. 35Policy support has now been broadened to address the most pressing issues. It began in the 36second quarter by improving access to financing for developers and helping to complete the 37large backlog of unfinished real estate projects, thus removing an important initial hurdle to 38improving the market. The next focus was on removing the many hurdles and restrictions to 39home ownership. Monetary stimulus and generous financing for infrastructure investment 40were stepped up. Debt restructuring of the highly indebted local government financing 41vehicles – another necessary condition for achieving a more sustainable situation and 42improving confidence – began in the third quarter. Robust investment in manufacturing and 43infrastructure as well as consumption spending, together with strong growth in the service 44sector, led to a strong rebound in the third quarter. The government's 5% growth target for 452023 was even slightly higher with 5.2% (National Bureau of Statistics of China)46Asset Management Industry47The asset management industry faced another turbulent year in 2023, following the 48challenges of the prior twelve months, which led to a decline in global assets under 49management. Despite a positive start to the year the US regional banking crisis and the 50forced merger of Switzerland’s two largest banks in Europe unnerved investors and markets. 51Meanwhile, concerns about central bank interest rates hikes, recession risks, deglobalization 52and, heightened geopolitical pressures continued, posing potential risks to business if not 53handled appropriately by national or subnational governments or agencies. Therefore, such 54developments will be closely monitored, i. e. tension between the US and China, the war in 55Ukraine and latterly the conflict in Gaza.56During the year, market uncertainty resulted in investors, particularly those in the US, seeking 57refuge in money market funds with the sector recording strong inflows, which were further 58buoyed by higher interest rates. Higher interest rates also encouraged investors back into 59bonds particularly in the first half of the year, following redemptions in 2022. Investors 60continued to favour passive investments over Active strategies with ETF inflows continuing to 61see positive momentum. Demand for alternative investments slowed with higher interest 62rates and lower valuations impacting some asset classes, although pockets of interest 63persisted, notably in green infrastructure and some private debt strategies.64New technology continued to be pivotal to product innovation and greater customisation as 65well as being an important lever for asset managers looking to reduce costs and increase 66efficiency in the less favourable investment environment.67Sustainable investing continued to be a key element of many large institutional investors’ 68portfolios, despite the continuing political backlash in the US. Although sustainable fund 69market flows dipped in 2023 year-on-year, “dark green” strategies with the strongest 70        71To our Shareholders Summarised 72Management Report73Consolidated 74Financial Statements Compensation Report Corporate Govern-75ance Statement76Supplementary 77Information DWS 2023 Annual Report78 79Our Strategy and Our Market8010 Economic and Competitive Environment