World economic experts have revised the present economic situation downwards to its lowest level since mid-2003.
The survey received 1,004 responses from economic experts in 90 countries in January 2008 when financial markets around the world were experiencing record losses and instability due to increased concerns over the state of the US economy and the international ramifications of the subprime mortgage crisis.
According to the experts, the subprime crisis strongly aggravated a cyclical contraction of the global economy, notably in the US, Europe and some countries in Asia. The sharpest economic downturns were reported in the US, UK, Switzerland, Ireland, France, Spain, Luxembourg and Japan.
Economists predicted that the negative impact of the subprime crisis will be concentrated in the first half of 2008 and will subside thereafter.
Given the current instability of the global economy, business leaders urged governments to take action to shore up business confidence.
ICC Chairman Marcus Wallenberg, who is also Chairman of Skandinaviska Enskilda Banken (SEB), Saab, and Electrolux, said: “ The successful completion of the Doha Round of trade negotiations would go a long way toward boosting economic confidence in all markets. One set of global rules governing international commerce would create new trade opportunities and help stem protectionist pressures. Negotiators are very close to an agreement. If they could sign off on the deal in the next few months, people in all countries would benefit.”
Members of the World Trade Organization have been working for more than six years on a multilateral trade deal that is designed to reduce tariffs and subsidies.
Guy Sebban, ICC Secretary General, said: “What is needed now is greater political will at the top to make the necessary compromises to close the deal. The leaders of the G8 nations and major emerging economies, in particular, should take bold steps to reach an agreement as early as possible in the first half of this year.”
The Ifo World Climate Index fell to 90.4 in January 2008, from 99.3 in October 2007, and 113.6 in the previous quarter of 2007.
The strongest decline in the economic climate indicator, as in the previous survey, was in the United States. Western Europe’s indicator fell at an above average rate, especially in the UK and Ireland. In Asia the largest declines were seen in Japan, Thailand and Taiwan whilst the rest of Asia remained largely unaffected by the global economic weakening.
For the first time since the end of 2003, a majority of experts are also predicting a decline in central bank interest rates.
Experts believe that the US dollar and the Japanese yen are still undervalued which is in contrast to the British pound and the euro which are considered to be overvalued. It is predicted however that the US dollar will weaken in the coming six months.