Economic upturn is running out

29/07/2008
After an unexpected dynamic start in 2008, world economy faced a partly dramatic downturn during the second quarter.
The economic situation in the United States is weak. With 1.5 %, GDP is expected to show below average growth in 2008. Via the substantial involvement in international trade the slipping dynamic is transferred to many countries. Now it becomes evident which economies have been able to pursue a successful diversification strategy regarding their sales markets over the past years.

Euro-zone did considerably well. European GDP is likely to achieve 1.7 % in 2008. Today European companies have many clients in Asia, South-America and Russia. They have also invested in new technologies and resource saving products bringing competitive advantages and unique selling propositions. Germany is pioneer and leader in this development and therefore currently still able to resist the worldwide economic downturn. German GDP should increase by 2.2 % in 2008.

In recent years, Japan became famous for its low economic growth. This trend continues. In 2008, GDP will rise by 1.3 % only. The focus of the Japanese industry on the price driven market for electronic products as well as an above average aging population prevents higher dynamics. Additional negative impulses from the world economy are likely to cut them even more.

Booming China is still unstoppable. Several measures taken by the Chinese government in order to avert an overheating of the economy have failed yet. Still GDP shows double-digit growth rates, even though the impetus will slightly fade in 2008 to 10.5 %.

India profits by the persistent worldwide interest in its location and sales market. High invests in modernisation and the expansion of capacities support the Indian economic development. But decreasing consumer spending will lead to slightly understated economic growth, however with 7.5 % it will turn out above worldwide average again.

The economy of Brazil is at its best for three decades. Raw materials from Brazil are in great demand. Stagnating deliveries to the United States could be more than compensated by sales to Asia – above all China – and South America. Thereby new jobs could be provided and the demand for consumer goods and immovable properties is booming. Therefore GDP should increase by 4.8 % in 2008.

The export growth of Russia is underpinned by the strong increase in global oil demand and prices. As a result the Russian foreign exchange reserves climbed up considerably and became third largest worldwide. Investment and household consumption give further stimuli to the economic development. GDP growth is expected at 7.0 % in 2008.

In addition to the poor development of the American economy, in many regions high rates of inflation cause falling consumer spending and thereby lower economic dynamics. Thus National Central Reserve Banks tend to increase interest level, which will have an additional negative impact on worldwide economy.