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12 | Merck Annual Report 2008
Overall economic situation
Global economy weakens significantly
The financial crisis that was triggered in summer 2007 by the problems in the U.S.
housing market resulted in recessionary trends in the global economy in 2008. In many
countries, these led to weak demand in industrial production sectors and were reflected
in real gross national product (GNP) of the last two quarters of 2008. While 2007
was still marked by global GNP growth of 5%, this value declined to 3.7% in 2008
according to the International Monetary Fund (IMF). The German Council of Economic
Experts registered global economic growth of 2.8% in 2008. The Organization for
Economic Cooperation and Development (OECD) reported a 1.4% increase in GNP for
its 30 members in 2008.
According to the IMF, raw material prices, which fell in the second half of 2008,
reflect the global economic downturn, the strengthening of the dollar and the finan-
cial crisis.
In addition, during the second half of 2008, consumer confidence fell, leading to
declining consumption and postponed investments, and thus lower product volumes.
While the United States saw a 2.0% increase in GNP in 2007, this number decreased
to 1.4% in 2008. In the euro zone, GNP grew by 2.6% in 2007 and, according to the
IMF and Eurostat, by 1.2% in 2008. Major European economies such as Germany,
France, Italy and Spain all registered a decline in GNP growth in 2008. GNP growth
in Germany declined from 2.5% in 2007 to 1.3% in 2008 and fell continuously as of
the second quarter. According to OECD statistics, France saw a decline in GNP growth
from 2.2% in 2007 to 0.8% in 2008 and Italy saw GNP growth decline from +1.5%
in 2007 to –0.2% in 2008.
Even high-growth nations such as China, Russia and India could not escape the global
trend completely. Initially, however, they were only slightly affected by the turmoil in
the financial markets and the global economic weakness. China’s double-digit growth
of 12% in 2007 declined to 9.7% in 2008, according to IMF data. This was the first time
in five years that the Chinese economy had posted single-digit growth.
Russia was not only affected by the global trend toward economic weakness but also
suffered from capital outflows due to the conflict in Georgia. According to data from the
German Council of Economic Experts, Russian GNP growth declined from 8.1% in 2007
to 7% in 2008. The OECD and the World Bank assume even lower growth rates.
According to the IMF, India recorded a 7.8% increase in GNP in 2008 following an
increase of 9.3% in 2007.
The Japanese economy grew by only 0.5% in 2008 following an increase of 2.1% in
the previous year, according to IMF data.