Goldman Sachs 2009 Annual Report Download - page 37

Europe. Real GDP in the Eurozone economies declined by an
estimated 4.0% in calendar year 2009, compared with an increase
of 0.5% in 2008. Fixed investment, consumer expenditure and
exports declined during 2009. However, surveys of business
and consumer con dence improved during the year. Although
employment levels declined in many economies, the largest
decreases were in the countries that were most affected by the
housing market decline. The rate of in ation declined during
the year. In response to economic weakness and concerns about
the health of the  nancial system, the European Central Bank
lowered its main re nancing operations rate by 150 basis points to
1.00%. In the United Kingdom, real GDP declined by an estimated
4.8% for calendar year 2009, compared with an increase of 0.5%
in 2008. Although real GDP declined signi cantly in the  rst half
of the year, it appeared to increase during the fourth quarter of
2009. The Bank of England lowered its of cial bank rate during
our  scal year by a total of 150 basis points to 0.50%. Long-
term government bond yields in both the Eurozone and the U.K.
increased during our  scal year. The Euro and British pound
appreciated by 2% and 11%, respectively, against the U.S.dollar
during our  scal year. Major European equity markets ended our
 scal year signi cantly higher.
Asia. In Japan, real GDP decreased by an estimated 5.0% in
calendar year 2009, compared with a decrease of 1.2% in 2008.
Measures of business investment, consumer expenditures and
exports declined. Measures of in ation also declined during
2009. The Bank of Japan maintained its target overnight call rate
at 0.10% during the year, while the yield on 10-year Japanese
government bond increased during our  scal year. The yen
depreciated by 2% against the U.S. dollar. The Nikkei 225
increased 21% during our  scal year.
In China, real GDP growth was an estimated 8.7% in calendar
year 2009, down from 9.6% in 2008. While exports declined
during 2009, the impact on economic activity was mitigated by
an increase in  xed investment and consumer spending, partially
due to  scal stimulus and strong credit expansion. Measures of
in ation declined for most of 2009, but began to increase toward
the end of the year. The People’s Bank of China left its one-year
benchmark lending rate unchanged at 5.31% during the year and
maintained a broadly stable exchange rate against the U.S. dollar.
The Shanghai Composite Index increased 77% during our  scal
year. Real GDP growth in India decreased slightly to an estimated
6.6% in calendar year 2009 from 6.7% in 2008. Industrial
production and consumer spending increased during 2009.
Exports declined signi cantly during 2009, but began to increase
by the end of the year. The rate of wholesale in ation decreased
during the year. The Indian rupee strengthened against the
U.S.dollar. Equity markets in Hong Kong, India and SouthKorea
increased signi cantly during our  scal year.
Other Markets. Real GDP in Brazil declined by an estimated
0.1% in calendar year 2009 compared with an increase of 5.1%
in 2008. Although investment spending declined, an increase
in commodity prices contributed to signi cant capital in ows,
which helped support consumer spending. The Brazilian real
strengthened against the U.S. dollar. In Russia, real GDP declined
by an estimated 7.9% in calendar year 2009, compared with
an increase of 5.6% in 2008. Low oil prices earlier in the year,
as well as a tightening in credit availability, led to a signi cant
decline in investment, consumption and exports. In addition, the
Russianruble depreciated against the U.S. dollar. Brazilian
and Russian equity prices ended our  scal year signi cantly higher.
Certain Risk Factors
That May Affect Our Businesses
We face a variety of risks that are substantial and inherent in
our businesses, including market, liquidity, credit, operational,
legal, regulatory and reputational risks. For a discussion
of how management seeks to manage some of these risks,
see “— Risk Management” below. A summary of the more
important factors that could affect our businesses follows
below. For a further discussion of these and other important
factors that could affect our businesses, see “Risk Factors” in
PartI, Item 1A of our Annual Report on Form10-K.
Market Conditions and Market Risk. Our  nancial
performance is highly dependent on the environment in which
our businesses operate. A favorable business environment
is generally characterized by, among other factors, high
global GDP growth, transparent, liquid and ef cient capital
markets, low in ation, high business and investor con dence,
stable geopolitical conditions, and strong business earnings.
Unfavorable or uncertain economic and market conditions
can be caused by: declines in economic growth, business
activity or investor or business con dence; limitations on
the availability or increases in the cost of credit and capital;
increases in in ation, interest rates, exchange rate volatility,
default rates or the price of basic commodities; outbreaks of
hostilities or other geopolitical instability; corporate, political
or other scandals that reduce investor con dence in capital
markets; natural disasters or pandemics; or a combination of
Goldman Sachs 2009 Annual Report
35
Management’s Discussion and Analysis