World Economy
While international oil prices fell significantly, after July 2008, the crisis in the financial and housing sector in the United States continues to have a significant effect on the economic growth in 2008-09. Recent analysis assess how risks to the international economy have intensified, while international organizations have negatively revise their forecasts for the rate of change of GDP in 2008 and 2009. According to forecasts from the International Monetary Fund (IMF), the world economy is expected to grow by 3.7% in 2008 and 3.8% in 2009. Compared with previous estimates, autumn 2007, world economy growth decreased by 0.5% in 2008 and 0.6% in 2009. The slowdown in the world economy is expected to limit the growth of international trade to 5.6% in 2008 compared to 6.8% in 2007.
Inflation is greatly accelerated internationally, due to increases in oil prices and food prices. Inflation in the United States amounted to 5.4% in August 2008, compared with the corresponding month of the previous year (in July it was at 5.6%). In the Euro Zone, inflation rose to 3.8% in August 2008 from 4% in July and June. Accelerated inflation has been observed in other emerging and developing economies such as China, 6.3%, Brazil 6.4%, India 11.9% and Russia 14.7% in July 2008. According to the IMF, based on the assumptions of March-April 2008, inflation in 2008 is expected to reach 3% in the United States, 2.8% in the Euro Zone, 2.5% in the United Kingdom, 5.9% in China, 4.8% in Brazil , 5.2% in India and 11.4% in Russia. The dramatic increase in oil prices in recent months, especially during June and July, has affected the expectations and forecasts increased inflation significantly in 2008. The price of Brent crude oil type (Europe Brent Spot), which, in July 2008, had reached a historical record high of $ 144 per barrel, fell considerably in the period August - September, coming to $ 90 a barrel on September 16th and analysts have negatively revised their forecasts in terms of global oil demand. This is attributed mainly to a slowdown in economic growth observed in many countries worldwide, mainly in the United States. According to the official information service of Energy for the Government of the United States of America, the price of Brent crude oil, which in August 2008 fell to an average $ 113 per barrel from $ 132 per barrel in June and July, is expected to reach approximately $ 116 per barrel throughout 2008 and to $ 126 per barrel in 2009 compared with $ 65 in 2006, and $ 72 in 2007. The International Energy Agency (IEA) in September negatively revised its forecast for oil supply from outside OPEC (Organization of Petroleum Exporting Countries) oil-producing countries for 2008 and 2009. Also, providing a reduction of demand from member countries of the OECD (Organization for Economic Cooperation and Development), the IEA estimates that annual global demand for oil to make a smaller increase in 2008 and 2009 than originally planned.
Food prices in international markets have increased significantly in 2008, although trends are stabilizing in recent months, particularly cereals. International prices of wheat and soybeans, for the period of January - August 2008, have increased an average of 60% and 74% respectively compared with the corresponding period in 2007. Compared with 2006, prices have more than doubled. Increases in food prices due mainly: (i) the continuing rise in demand for commodities and higher value added food from emerging economies such as China, Brazil and India, (ii) the emergence of alternative markets, particularly in the bio-fuels market, and (iii) the adverse weather that affected many countries, producing and exporting food.
Interest rates are expected to remain unchanged in the United States and the Euro Zone since the expectations have changed. The Federal Reserve (Fed), which is expected to display a waiting stance in the coming weeks, left interest rates unchanged at 2%, in September, announcing simultaneously that in the coming quarters a weak economic activity is expected, resulting mainly in the lack of liquidity, the downturn in the housing market and the expected slowdown in the export sector. Dramatic developments recently in the banking system have affected, significantly, the international economic environment, increasing the likelihood for a prolonged economic downturn. The European Central Bank, which announced in September that it will make a change in base rate, is also expected to display a waiting stance. Noted that in July 2008 the European Central Bank has raised the base rate by 25 basis points, after a long period during which the growth cycle of interest rates in the euro area was suspended.
European Economy
The crisis that hit the United States, overshadows at this stage, the economic outlook of the European Union and the Euro Zone. According to preliminary estimates by the European Statistical Office (Eurostat), GDP grew by 1.6% in the European Union and 1.4% in the Euro Zone in the second quarter of 2008, 1.1% in France, 1.7% in Germany and 1.4% in the UK, 2.8 % Netherlands, Austria 2.3% and Greece 3.5%. Spain and Italy have been affected to a greater extent from the crisis with Spain in the second quarter of 2008 displaying a growth of 1.8% (from about 4% in previous quarters) and zero growth in Italy while Ireland which is undergoing a deeper economic crisis in the first quarter of 2008 showed a decrease of 1.2%.
The European Commission in September 2008 has negatively revised its forecast for economic growth in 2008. According to the European Commission, the growth rate of the Euro Zone in 2008 will be limited to 1.3% from 1.7% in the previous forecast and 1.5% in 2009.
In August 2008, the Index of Economic Times continues in a downward trend, both in the Euro Zone and the EU It fell by 1.9 points in the EU and by 0.7 points in the Euro Zone, reaching 86.9 and 88.8 respectively. In the EU, this ratio reached its lowest point since December 1993.
The Business Climate Indicator in the Euro Zone continues to decline after the fall below the long term average of July 2008. The low level of the indicator suggests that industrial activity remains subdued.
International News
* England: a bleak future in the property sector
* Greece: Property - Interest-free Borrowing directly from the manufacturers
* Greece: The crisis strikes the office market
* Greece: begin discounts on properties
* Greece: Major problems in the housing market
Οδός Ανδροκλέους 3Α, 1060, Λευκωσία, Κύπρος,
