Significant slowdown in world trade in 2007 - emerging economies still experiencing sustained growth according to WTO estimates. According to international trade prospects published by the World Trade Organisation (WTO), growth in world trade could fall to 4.5% in 2008, following last year's slowdown to 5.5% and the healthy rate of 8.5% in 2006. According to economists, sustained growth in transition countries only partially compensates the sharp economic slowdown in developed countries, which explains this fall in trade. Turbulence on the financial markets, which has led to considerable downward revisions in growth forecasts for certain big developed countries, is casting a shadow on prospects for world trade in 2008. Growth forecasts for these markets are currently 1.1%, whereas they are around 5% for developing countries. More specifically, the slowdown in the world economy and international trade began in 2007 as a result of fall in demand in developed countries. North America has the lowest rate in growth in output, as measured in its Gross Domestic Product (GDP). Developing countries and the Commonwealth of Independent States (CIS) region, however, have maintained or strengthened their expansion of output, contributing more than 40% of world output growth in 2007. Developing countries' share of world merchandise trade (exports plus imports) reached a new record level of 34% in 2007. Domestic demand weakened sharply in the US in 2007, which reduced external deficit and led to the weakest annual GDP growth rate (2.2%) since 2002. A further widening of the external surplus contributed to more than half of Japan's 2.1% GDP growth rate in 2007. Europe recorded GDP growth of 2.8% - a somewhat better performance than both Japan and the United States last year. Stimulated by sharply higher export earnings and rising investment, Russia's economic growth of 8% was the strongest annual rate since 2000. In Central and South America, Africa, the Middle East and developing Asia, economic expansion rates showed no signs of deceleration in 2007. The most populous developing countries - China and India - continued to report outstandingly high economic growth. One sign of economic growth was the fact that global foreign direct in vestment (FDI) flows continued to rise, which demonstrates confidence by international investors. Developing countries associated to the CIS accounted for 34% of world merchandise trade in 2007, which compensated for the negative repercussions of the turbulence on the financial markets, particularly those on the at risk loans market in the US during the second half of 2007. Overall, according to provisional estimates by UNCTAD, global foreign direct investment (FDI) flows increased by 18% to $1.54 trillion in 2007. Foreign direct investment flows to Latin America (e.g. Brazil, Chile and Mexico) and Russia have been particularly strong (50% and 70% respectively). FDI flows to developing Asia and the new EU member states are estimated to have seen less dynamic growth in FDI inflows in 2007 than in the past. As regards exchange rates and inflation, the report notes that variations in the exchange rates of major traders in 2007 did not always result in effective exchange rate developments conducive to a reduction in global imbalances. Prospects for 2008 are bad because of the recent events darkening short term perspectives in the world economy. The WTO expects recessionary tendencies in the United States, weaker demand growth in both Europe and Japan, a rise in inflation and depressed global stock markets. More positive news comes from developing countries and the CIS, where strong output and trade growth are predicted. Economists, however, are unsure as to how long the developing countries can maintain a strong pace of economic growth in the face of sluggish demand in the major developed markets and rising inflationary pressures. (I.L.)