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Fiscal 2008 was a year of contrasts. The economy’s good start was followed by one of the biggest financial and economic crises in the post-war era. Developments on commodity Glossary markets could not have varied more, either: Oil and hard coal prices reached successive record highs before going into a rapid downward spiral from the middle of the year. This was reflected in the price of electricity. However, the major price swings on the energy exchanges did not have a major impact on our 2008 earnings: We sold forward our generation in prior years and secured fuel costs early on.
Crisis on financial markets dampens global economy.
The deepening of the financial market crisis had already significantly affected the economy in 2008. World economic growth dropped from 3.7 % (2007) to an estimated 2 %. All leading industrialized countries experienced massive economic collapse by year-end. Economic output in these countries has declined recently. Emerging countries continued to increase their economic performance, albeit with waning momentum.
Real gross domestic product (GDP) in the Eurozone was 0.7 % up year on year. Germany posted a gain of 1.3 %. Following a strong first quarter, industrial production increasingly suffered from the weakening economy. The euro’s gain on the US dollar had an adverse effect on exports, which rose nevertheless. Despite declining capacity utilization, corporate investment in property, plant and equipment matched the growth rate witnessed in 2007. Consumption was flat, despite higher wages and a temporary improvement in the labour market.
Growth recorded in the UK, our second key market, was similar to that of the Eurozone, estimated at 0.7 %. Falling orders and corporate spending on property, plant and equipment, coupled with a marked decline in construction, characterized the economic situation. Since the UK real estate market is in the middle of a serious crisis, many households saw their assets substantially devalued. This had a negative effect on consumer behaviour. Despite counteracting measures such as tax cuts and reductions in interest rates by the central bank, the situation remained tense.
The countries of Central Eastern Europe expanded at a fast pace and had strong currencies until the middle of the year, but their situation also deteriorated considerably in the second half of the year. However, the economic output for the region as a whole was still some 5 % higher than the previous year’s level. Estimates have Poland recording 4.9 % growth, the Czech Republic 4.1 % and Slovakia 6.7 %. The employment situation in these countries remained favourable. Robust demand for investment and exports also supported these economies. Much weaker developments were displayed by the Hungarian economy. It only grew by an estimated 1 %, largely driven by higher state spending.
