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Euro economy to slow in 2008 due to credit squeeze
Published in Saudi Press Agency on 18 - 12 - 2007


The recent turmoil on the international financial
markets is expected to dent the euro area's economic growth prospects
for 2008, the latest Quarterly Report from the European Union
Commission said Tuesday, according to DPA.
The report by the EU executive forecasts gross domestic product
(GDP) growth for 2008 in the 13-country eurozone at 2.2 per cent,
down from an expected growth rate of 2.6 per cent in 2007.
"Economic activity is expected to moderate as the conditions in
international finance markets have deteriorated significantly and
remain fragile. Whilst the effects of the turmoil have, so far, been
largely confined to the financial sector, there are some signs that
also they may have been impacting the rest of the economy," the
report stated.
Reduced confidence and rising inflation, which surged to a six-
year high of 3.1 per cent in November due to higher oil and food
prices, were also being blamed for the probable slowdown.
But the report also suggested that economic activity would
"continue to be supported by robust employment growth and record-high
profitability in the non-financial corporate sector."
Euro area GDP growth rebounded to 0.7 per cent in the third
quarter of 2007 from 0.3 per cent in the second quarter, thanks
largely to robust domestic demand and a pick up in investment, the
Commission said.
According to a separate Eurobarometer survey, also published on
Tuesday by the EU's executive, 26 per cent of Europeans said they
expected the economy to worsen over the coming 12 months, compared
with 24 per cent who said it would probably improve.
Most respondents, 44 per cent, said they expected no change in the
economic situation during 2008.
Overall, 49 per cent of the roughly 30,000 Europeans polled said
the economy was in a bad state, compared with 48 per cent who said it
was in a good shape. Officials in Brussels noted that the "feel-good
factor" had ebbed somewhat from the spring, when 52 per cent of those
taking part in the Eurobarometer survey had said the economy was in a
"good" or "very good" state.
Meanwhile, the EU's statistical office, Eurostat said booming
trade with the world's leading emerging economies had helped offset a
slide in exports to the US and Japan.
Despite a strong euro, total exports from the 13-member eurozone
increased 2.3 per cent month-on-month in October, with imports rising
by 2.0 per cent, Eurostat said.


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