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Economic Forecast 2009

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The German economy is heading for stagnation in the second half of 2008. The economic engine had already stalled in the second quarter. In the fall the sentiment indicators clouded over further mainly due to the financial market crisis, and the “hard data“ also provide little cause for optimism. However, assuming that the financial market crisis gradually loses its sting in the early months of 2009, we see good prospects for a pickup in the economy next year.


, Sep 30, 2008

Assuming that the financial market crisis gradually loses its sting in the early months of 2009, there are good prospects for a pickup in the economy next year. In 2009 there will be substantial relief on both the oil and the exchange rate front. A decline in inflation will boost the purchasing power of private households – whose disposable income is currently rising at an annual rate of 2.5 % – and could start to stabilize the economy this year. All told, we therefore expect to see an increase in real GDP of 0.7 % in 2009 (previous forecast: 1.5 %) after 1.8 % this year (previously 2.0 %).

In the wake of the financial market and housing crisis and the aftermath of the energy price shock the world economy has hit a rough patch. For the USA we have penciled in subdued growth of 1.1 % after 1.6 % this year. In Japan 2009 growth is likely to be around 1 % after 0.8 % this year. Despite a marked slowdown, the emerging markets will once again prove to be a pillar of global growth with an expected GDP increase of 5.5 % in 2009. All in all we expect the world economy to record GDP-weighted growth of around 2.6 % in 2008 followed by 2.2 % next year. Although well down on recent years, it is not a global recession. In the course of 2009 the world economy is likely to regain momentum.

In the first quarter the euro area also saw dynamic investment demand and brisk export activity more than offset languishing private consumption. But after a sharp drop in the second quarter, the second half of the year is likely to resemble a barren patch. Gloomier prospects on the labor market, high inflation and the uncertainty on the financial markets are casting a pall over consumption and investment activity. All told, we expect real GDP growth of 1.2 % for 2008 as a whole thanks to the good start to the year. However, the economy should gradually pick up in the course of 2009 – buoyed by lower commodity prices and the decline in the euro – average growth is likely to be appreciably weaker than in 2008 at 0.7 % due to the low starting point at the turn of the year.

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