The global financial crisis, triggered by the US housing slump, impacted world economic growth in 2008. Without massive government intervention, the entire financial system would probably have collapsed. The second half of 2008, in particular, saw a significant slowdown in the global economy. Leading economic research institutes consequently revised their growth forecasts for 2008. The downturn spread worldwide and will continue in 2009. According to International Monetary Fund (IMF) estimates, the global economy grew just 3.4% in 2008 (2007: 5.0%).
Global Economic Downturn since the Second Half of 2008
In the USA, economic growth weakened yet again compared to the prior year. According to the IMF, GDP rose 1.1% (2007: 2.0%). For years, the US economy had been driven largely by debt-fueled consumer spending. Unemployment, the stock-market crisis and housing slump all persuaded countless consumers to cut spending. This adversely impacted such key industrial sectors as the auto industry, and accelerated the downturn.
Economic growth remained strong in Asia, although it, too, felt the first signs of a slowdown during 2008. The Asian Development Bank (ADB) expects the region’s economy to grow 7.5% (2007: 9.0%). Chinese growth was even stronger, due to the continued, high investment level and increased consumer spending. According to ADB figures, Chinese GDP is set to grow 9.5% (2007: 11.9%). In contrast, Japan’s economy stalled. The IMF expects the Japanese economy to shrink 0.3% in 2008 (2007: +2.1%).
After four years of healthy growth, Europe did not escape the effects of the slowdown. The IMF predicts growth of 1.0% (2007: 2.6%). While exports continued to provide momentum, consumer spending dropped. Some European countries, notably Spain and the UK, experienced a radical correction of housing prices.
The German economy weakened, too. Based on official federal statistics, German GDP grew 1.3% (2007: 2.5%). As in previous years, the rise was due to the high level of German exports. However, since December 2007, German industry has seen orders falling with each passing month, and a drop is to be expected in 2009.