Contraction of Developed Economies

The OECD economies grew at a significantly slower pace of 0.8% in 2008 compared to 2.7% a year earlier. The slowdown was particularly sharp in the final quarter following the collapse of Lehman Brothers in September. Despite measures to ease the ensuing credit crunch and support demand, the major economies slipped into deep recession by the end of 2008.

In the US, gross domestic product (GDP) fell by an average of around 6% q-o-q SAAR (quarter-on-quarter seasonally-adjusted annualised rate) in Q4 2008 and Q1 2009, one of the steepest declines in the post-war period. Although personal consumption regained some ground after two consecutive quarters of decline, private investment fell by an unprecedented amount in Q1 2009 while exports remained a severe drag on the economy.

The Eurozone economies contracted by an average of 8% q-o-q SAAR in Q4 2008 and Q1 2009, significantly worse than the average decline of 1% in the preceding six months. Exports plummeted in line with depressed global demand, while domestic spending also declined sharply amidst falling asset prices and rising unemployment.

In Japan, GDP contracted continuously for four quarters, with the deepest fall in Q1 2009. Exports led the decline in the first three months of 2009, as the global financial crisis and strong yen combined to dampen demand for Japanese goods. Business investment also contracted in response to the poor outlook for final demand and depressed corporate profits.