Our first Regional Focus this month is on non-EMU western Europe, highlighting the UK, Sweden and Switzerland. In these countries the economy has now cooled off after years of robust  growth. At the same time inflation has risen sharply in all three countries. While we expect to see one further rate hike in Sweden, rates have probably now peaked in Switzerland. And the UK has now already lowered its rates twice.

In our second Regional Focus we put the spotlight on the Latin American countries Brazil, Chile and Colombia. Whereas countries in this region used to be heavily dependent on the USA, the current slowdown in the US, while not bypassing Latin America altogether, is unlikely to have too severe an impact.

This month’s Special Focus takes a look at Brazil’s energy policy. Having been heavily dependent on energy imports back in the early 1970s, it has now stepped up its own oil output substantially. At the same time Brazil has also invested in the development of alternative fuels and can now reap the rewards. 

And, of course, you will also find our monthly reports on the USA, the euro area and Germany.

Enjoy!

 

Economic downside risks remain high for the time being. The stimulus package, however, is intended to help the economy get clearly back on the growth track in the second half of the year. The US Federal Reserve is likely to trim the key interest rate down to 2.5%.

It’s official: the euro-area economy weakened considerably at the end of 2007. All growth drivers are likely to have been affected. This slower pace is set to continue for the first half of the year.

As expected, the German economy lost momentum in the fourth quarter of 2007. Current economic indicators, however, encourageus to believe that the economy will pick up speed again in thesecond quarter. But defending Germany’s title as world championin exports may prove to be more difficult.

All three countries under review recorded strong growth again in 2007, with the central banks each responding in the course of the year with further interest rate hikes. While we expect a further hike in Sweden, interest rates now look to have peaked time in Switzerland. By contrast, the UK has already lowered key interest rates twice.

The US economy is swooning. Without rate cuts or stimulus package, it would probably slither into recession. What does this mean for the southerly neighbors which have long profited from the global might of the US economy? Will Latin America beinfected and, if so, how severe will the impact be?

 

At the beginning of the seventies, Brazil was heavily dependent onenergy imports. The oil crisis of 1973 therefore dealt a massive blow to the country. Within the shortest space of time, the trade deficit had ballooned tenfold and currency reserves had halved by the middle of the seventies. In the course of the industrialization policy, the goal of which was to substitute imported goods fordomestic products and which culminated finally in the debt crisis of the eighties, Brazil endeavored to lower its dependence on oil imports. On the one hand, the country greatly expanded its own oil production and on the other it invested in developing alternative fuels such as ethanol.