Brussels, 26/02/2008 (Agence Europe) - Uncertainty remains, but the economic prospects are not entirely bleak, the seventh report by the CESifo expert group on the European economy in 2008 says. According to the economists at this economic research centre based in Munich the turbulence on the financial markets and the slowing of the American economy, combined with elevated energy and food prices, will continue to affect the global economy in 2008. Business profits and developments on the labour market will nonetheless remain broadly favourable.
Like the European Commission last week (EUROPE 9607), the CESifo report published on Tuesday 26 February is not counting on a recession in the US economy (which, according to them will see growth of 1.7%). American performances remain difficult to predict but, given the decent state of the global economy and the weakness of the dollar, exports will continue to support activity in the US, the authors explain. In Asia the subprime mortgage crisis has not yet affected the banking system and the economies of the region should, in particular thanks to strong domestic demand, be capable of offsetting part of the slowing of global activity, the report believes. In Europe the dynamic of growth has begun to suffer from a drop in producer confidence following the start of the turbulence on the financial markets. The strong euro and consequent drop in US imports will contribute to reducing growth in the first half of the year, the authors estimate. For 2008 they predict an increase of 2.1% in the EU 27 and of 1.8% in the eurozone (the Commission envisages 2% and 1.8% respectively). In general terms, the impact of the American real estate crisis would appear to be less marked than is often suggested, the report also notes. Finally, it estimates that in spite of the tightening of monetary conditions in the eurozone, inflation should stay ahead of the European Central Bank's (ECB) objectives into 2009. The report, which also looks at several issues linked to globalisation, is available online at: http://www.cesifo-group.de/portal/page/portal/ifoHome/B-politik/70eeagreport. (A.B.)