ECONOMIC OUTLOOK

In view of the continuing strained situation on the global financial markets, world economic growth can be expected to be weaker in the foreseeable future. The outlook may brighten a little in the second half of 2009, when the fiscal policy measures already initiated should start to take effect. However, experts do not believe this is likely to trigger a sustained upswing dynamic such as that witnessed in 2004 to 2007. According to current estimates, it is expected that global GDP growth will decrease by 0.1% in 2009. From a global perspective, 2009 is likely to be a generally weak year, especially in view of the pronounced weakening of the economic dynamic in the industrial countries and the resulting repercussions for the hitherto booming emerging economies.

Europe
The Eurozone is set for its worst recession since World War II, with a drop of 2.5% in GDP in 2009. On the whole, the economy in the Eurozone will recover only very slowly. Europe’s governments will be continuing their efforts to stabilize the situation on the financial markets with rescue plans and economic programs. Although the European Central Bank (ECB) has already cut its rates by 225 basis points since October 2008 to 2.0%, there is likely to be room for further monetary policy moves in 2009 since the continued easing of world commodity prices is helping to bring down inflation closer to the ECB’s target level. Nonetheless, the process of transmitting the cheaper credit conditions to firms and consumers is likely to remain disrupted.

In Germany, GDP is set to contract sharply in 2009, with a drop of 2.5% according to current estimates. Economic momentum has been hit especially by the dramatic fall in global demand for Germany’s exports. Nor is private consumption likely to provide much stimulus in 2009. Given the subdued global outlook, private investment may be expected to be extremely weak.

Growth is currently expected to slow appreciably in the emerging economies of Central and Eastern Europe.