Bulgaria’s economy grew by 7% year-on-year in the first nine months of 2008, in real terms, to 48.04bn leva or €24.56bn euro, according to the National Statistical Institute.
Gross domestic product (GDP) growth in the third quarter of the year edged down to 6.8%, or 18.61bn leva, compared to the 7.1% recorded from April to June. Per capita GDP in the third quarter was 2,430 leva or €1,242.2, while for the first nine months of the year the per capita figure was 6,271 leva or €3,207 euro.
Economic growth was helped by a strong showing from the agriculture sector, helped by a bumper harvest, from 7.3% in the same period in 2007 to 9.6%. Services accounted for half of the total GDP, growing by 6.4% in January-September.
Total consumption recovered from a slowdown in the first half of the year, recording 5.4% growth in the third quarter, compared to 4.7% over the first six months. Household consumption growth was 5.9% in the quarter, compared to 5.5% in the first half of the year.
The Cabinet targets 6.4% economic growth for 2008, the same target it set last year, when end-year GDP growth was 6.2%.
Denmark lowers interest rate
Denmark’s central bank recently lowered its key interest rates by 0.5% to 3.75%.
The Nationalbank said the reduction was a consequence of developments in currency markets, where it recently had to buy foreign exchange to keep the value of the krone stable. Denmark’s central bank seeks to keep its currency level against the euro by buying or selling foreign exchange and by changing its interest rates.
Nationalbank said in a statement it lowered its lending rate and the rate of interest on certificates and deposits, effective immediately. The discount rate and the current-account rate remain unchanged at 3.5%.
European Union member Denmark is not part of the 12-country European Monetary Union.
ECB wants to jumpstart lending between banks
The European Central Bank (ECB) recently moved to jump-start lending between banks by announcing it would effectively lower the interest rate it pays on overnight deposits while raising its emergency-lending rate.
The move leaves the central bank’s benchmark lending rate unchanged at 2.5%. but from 21 st January, the rate the central bank offers on overnight deposits will be set 1% below the refinancing rate, rather than 0.5% lower. The emergency-lending rate charged on overnight loans will be set 1% above the refinancing rate, rather than the current 0.5%.
This returns the so-called standing-facility corridor to 2%, where it stood until the ECB moved to narrow it in October.
Jean-Claude Trichet, ECB’s president, recently indicated such a move was under consideration in hopes of spurring banks to boost interbank lending rather than relying on the overnight facilities.
The ECB gave no reason for the move in its announcement, but analysts said it was also meant to stem a surge of overnight deposits following the US Federal Reserve’s decision to cut its key lending rate to virtually zero.
With the Euro-zone already in recession, the euro’s sharp rise against both the dollar and the British pound have likely unsettled ECB policy-makers, who fear a stronger currency will further undermine exports, economists said.
Lowering the overnight deposit rate will make it less attractive for banks to park funds overnight with the ECB. Similarly, the rise in the lending rate will make it more expensive for banks to borrow from the ECB.
Worldwide News
NZ’s retail suffers the most in four years
New Zealand’s retail sales dropped the most in more than four years in October as spending on cars fell amid a slowing economy, job cuts and weaker consumer confidence.
Retail sales decreased by -1.3% from September’s figure when they rose by +0.3%, according to Statistics New Zealand and vehicle sales fell -15% although core retail sales, which exclude cars, fuel and workshops, increased +0.8%.
New Zealand’s $130bn economy is in the worst recession in 18 years as a housing slump and tightening global credit curbs spending and investment. Falling sales add to signs growth won’t return to the economy until next year when fourth-quarter tax cuts and interest rate reductions take full effect.
New Zealand’s unemployment data rose to a four-year high of 4.2% in Q3 2008 and may increase further, economists say. A net 21% of companies expect to fire workers over the next year, according to a November survey by ANZ National Bank. The net number subtracts those expecting staff numbers to rise from those expecting a decline.
New Zealand’s economy contracted in the first half of 2008 and also probably shrank in the third quarter, making the recession the worst in 18 years. Alan Bollard, Reserve Bank Governor, recently predicted growth will resume in the fourth quarter and demand will recover slowly through 2009.
Bollard has cut the official cash rate by 3.25% since July to kick-start spending. The Government also lowered income taxes on 1 stOctober.
House prices in Dubai may fall 28%
House prices in Dubai are likely to fall almost 28% from a peak earlier this year as a sharp downturn in demand puts the brakes on a six-year property boom in the desert emirate, according to a Reuters survey.
Residential real estate prices in Dubai are set to decline 15% next year, according to the median forecast of seven analysts at banks, investment firms and research institutions conducted by Reuters.
Six of the analysts think the peak in prices in Dubai has already been reached, possibly as early as June. From the peak, prices could fall 27.5%, including a 17.5% drop from their levels now, according to median forecasts in the survey. Three analysts said the correction from peak to trough would be +30%, with one expecting a drop of 55%.
The most acute pressure will be on off-plan properties, as speculators seek to sell properties urgently during a global credit crisis that has left many buyers struggling to get mortgage loans, according to analysts.
House prices in Dubai have soared since 2002, when the emirate opened up to foreign investors by offering freehold ownership in designated areas, including on the Palm Jumeirah.
Colliers International recently said that prices had surged 80% in the third quarter compared with the year earlier. But quarter-on-quarter price growth has slowed sharply, from 43% in the first quarter to 5% in the third.
US interest rates hit 0-0.25%
The US Federal Reserve cut interest rates to virtually zero in December, with the range being 0-0.25%, down from the previous 1% rate, which is the lowest since 1990.
The move is evocative of the zero-rate policies employed by Japan in its six-year battle against deflation, and is the first time since 1979, when then-chairman Paul Volcker was trying to combat serious deflation, that the Fed has used something other than interest rates to battle the economy.
In addition, the Fed said it was looking into the possibility of buying up US gilts in the new year, and stands ready to extend credit to small businesses and households as well as expand previously announced purchases of agency debt and mortgage-backed securities.
The decision was led by Ben Bernanke, Fed chairman, an expert on the 1930’s Great Depression who is determined to stop the US economy from repeating past mistakes.
In a statement accompanying its decision, the Fed’s Open Market Committee said it ‘will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability’.
It went on to say that due to the anticipation of continued weak economic conditions, its federal fund rate is likely to remain ‘exceptionally low’ for some time.
