Combined Management Report 8. Report on expected developments and associated material opportunities and risks 8.1 Report on expected developments 8.1.1 Worldwide economy The global economy showed remarkable resilience in calendar 2023, given the number of headwinds and negative economic shocks from the previous year. Nevertheless, these shocks still have adverse implications for economic growth in calendar 2024, especially the dampening effects of tighter financial conditions. Accordingly, in calendar 2024 the global economy is expected to further slow down to 2.3% GDP growth, after 2.6% in calendar 2023. Given the high number of active and potential geopolitical conflicts, the outlook is subject to a high level of uncertainty. In the E.U., GDP is expected to increase by 0.8% in calendar 2024, after an anticipated growth of 0.4% in calendar 2023. The effects of the energy crisis still show negative impacts, especially in energy-intensive industries. Tighter monetary policy – the European Central Bank lifted the main policy interest rate to 4.5% in just over one year – also held back growth, particularly in the construction industry. The German economy is most impacted due to its proportionally large manufacturing sector and is expected to grow by only 0.5% in calendar 2024. The U.S. economy is expected to decelerate to a soft landing. After unexpectedly strong GDP growth (expected to be +2.5%) in calendar 2023, caused mainly by a very strong services sector while industry was weak, growth in calendar 2024 is expected to slow down to 1.6%. Tighter financial conditions – the Federal Reserve increased the main policy interest rate to 5.5% and longer-term interest rates also increased substantially – will unfold their full effect next year. Hence, a short and shallow recession during calendar 2024, while not our baseline assumption, is also possible and expected by some economists. Consumer spending is expected to continue as a primary growth driver, while government investment programs (CHIPS Act, Inflation Reduction Act) play a supporting role for the economy as they spur business investment. GDP in China is expected to grow at only 4.6% in calendar 2024, after an anticipated growth of 5.0% in calendar 2023. The correction in the real estate sector will continue to weigh on GDP growth. During calendar 2024 global goods demand, world trade and industrial production are expected to modestly increase again. The main assumption behind this expectation is further normalization for two critical factors: consumer spending and the inventory policies of companies. Both weighed on industrial output in calendar 2023 but are expected to modestly support growth of the Chinese economy in calendar 2024. In addition, Chinese private consumption is expected to drive domestic demand and some tailwinds will come from announced stimulus measures. Globally, the decline of inflation rates is expected to continue, although at a slower pace. Past interest rate hikes are having the desired effect, and headline inflation is expected to steadily approach the central bank targets. Hence, monetary policy is expected to become less restrictive in calendar 2024. Global fixed investments should benefit from government programs and from factory investments to improve supply chain resilience and other diversification measures. Global gross fixed investments are expected to grow by 3.2% in calendar 2024, unchanged from 3.2% in the year before. Given the forecasted further slowdown of the global economy, growth of markets served by Siemens is also expected to slow in fiscal 2024 in light of significant headwinds, few tailwinds, and reduced stabilizing effects from high industry’s order backlogs and price adjustments in a number of our businesses. The forecasts for calendars 2024 and 2023 presented here for GDP and fixed investments are based on a report from S&P Global dated October 15, 2023. 8.1.2 Siemens Group We are basing our outlook for fiscal 2024 on the above-mentioned expectations and assumptions regarding the overall economic situation and also on the specific market conditions we expect for our respective industrial businesses, as described in chapter 3 Segment information. Furthermore, we assume that geopolitical tensions do not further increase. We expect improvements in productivity and adjusting prices for our own products, solutions and services to more than offset effects from wage increases and higher prices for raw materials and components. We are exposed to currency translation effects, mainly involving the U.S. dollar, the British pound and currencies of emerging markets, particularly the Chinese yuan. Siemens is still a net exporter from the Eurozone to the rest of the world, so a weak euro is principally favorable for our business and a strong euro is principally unfavorable. While we expect volatility in global currency markets to continue in fiscal 2024, we have improved our natural hedge on a global basis through geographic distribution of our production facilities in the past. In addition to the natural hedging strategy, we also hedge currency risk in our export business using derivative financial instruments. We expect these steps to help us limit effects on income related to currency in fiscal 2024. In this outlook, we assume that currency translation effects in fiscal 2024 slightly reduce nominal volume growth rates for Siemens and profitability of our businesses. This outlook excludes burdens from legal and regulatory matters. Segments Digital Industries expects for fiscal 2024 comparable revenue development of 0% to 3%. This is based on the assumption that following destocking by customers, global demand in the automation businesses, especially in China, will pick up again in the second half of the fiscal year. The profit margin is expected to be 20% to 23%. Smart Infrastructure expects for fiscal 2024 comparable revenue growth of 7% to 10%. The profit margin is expected to be 15% to 17%. Mobility expects for fiscal 2024 comparable revenue growth of 8% to 11%. The profit margin is expected to be 8% to 10%. 22