Global economy grew 5.2 pct in 2007, NBM

The National Bank of Moldova said in its recently published quarterly bulletin the global economy grew 5.2 percent overall. Despite the turmoil on the world’s financial markets, the global economy continued an upward trend, notably thanks to emerging and developing economies. China, whose economic growth in 2007 was estimated at 11.4%, was for the first time the main contributor to the global economic growth, both in terms of purchasing power parity and market prices. Economies in India and Russia also continued to expand. Their growth rates in real terms were estimated at 8.9% and 7%, respectively. Half of the global economic growth in 2007 was considered to be these countries’ merit. The economic boom in these countries counterbalanced the slowdown in the United States, whose growth rate was estimated at 1.9%. The American economy lost steam after the subprime mortgage crisis – a sharp rise in home foreclosures in the fall of 2006 – which spread into a global crisis in 2007 and 2008. In the Euro zone, the economic growth was steady yet slower than in the previous year, with GDP growth dropping two-tenths of a percentage point from 2.8 percent in 2006 to 2.6 percent in 2007. The European economy was buoyed up by amplified investment which came in response to the increased regional and global demand for machinery and equipment, rises in constructions and exports, as well as due to high levels of corporate profitability and production. At the same time, the economic growth was affected by a stronger Euro and stiffer lending conditions, which led to a relative slowdown in household consumption and investment in real estate. Consumer prices rose by 3.1%, compared to 1.9% in 2006, influenced by energy and foodstuff price hikes. However, the unemployment rate went down to 7.1%. The economies of Germany and France registered a growth of 2.5% and 1.9%, respectively. Economic growth in the EU-27 averaged 2.9%, while inflation stood at 3.2%. According to forecasts, the economic growth in Ukraine topped the 7 percent level in 2007; inflation was reduced by 5 percentage points to 16.6%. Moldova’s Ministry of Economy and Trade expects a 4 percent growth in the Gross Domestic Product (GDP) for 2007. The direct impact of last summer’s drought was a 5 percent subtraction from GDP growth, with nine-month GDP value reaching 40.3 billion lei, a 3.3 percent rise compared with the corresponding index in 2006. In 2007 the main source for GDP growth was investment. In nine months alone, investment in fixed capital amounted to about 7.5 billion lei, which is a 28.7 percent increase against the corresponding period of 2006. At the same time, foreign direct investment saw a record rise of almost 200 percent to stand at nearly 450 million US dollars in nine moths of 2007. This surge was mainly due to Moldova’s proximity to the European Union and a rising interest in the banking sector.