The Budget for 2008, which had been prepared in
rather exceptional circumstances, was finalised at the beginning of March
2008. As is customary for the economic context, it was drawn up with
reference to the Economic Budget compiled by the National Accounts Institute
on 8 January 2008.
In drawing up these forecasts, the Federal Planning
Bureau relied mainly on the outlook resulting from the OECD's December 2007
forecasts for its assumptions concerning the international environment.
The global economic situation and the short-term
growth prospects are particularly uncertain in early 2008. The economic
context taken into consideration when drawing up the Budget seemed quite
reasonable on the basis of information available at the time it was being
prepared.
Since the end of summer 2007, there has been
persistent turbulence on the financial markets. The impact of this turmoil
on the real economy is undeniably perceptible but difficult to assess
precisely, both in terms of duration and scale. The most marked
repercussions are on the American economy. In its Interim Assessment
released in mid-March, the OECD forecast that the rate of growth of the US
economy would remain around zero in the first half of the year. Beyond that,
the likely impact of the economic support measures taken by the US monetary
and fiscal authorities remains highly uncertain. Overall, a fairly sharp
downward revision of the economic growth forecasts for the United States
from the figures issued at the end of 2007 could be necessary.
On the other hand, the emerging economies, and China
in particular, so far seem to be relatively immune to the turmoil on the
financial markets as a result of the subprime mortgage crisis, and, at most,
the rhythm of growth there has seen a slight slowdown from the exceptional
performance of 2007, in line with expectations.
Although their forecasts are very cautious as they
have to take account of numerous risk factors, both the European Commission
(February Interim Forecast) and the OECD (March Interim Assessment) point up
the relative resilience of the European economies, even if the OECD
considers that euro-area "growth is set to remain on the low side of
potential for some time".
The consumer and business confidence indicators have
been falling back since August, not only in the euro area but also in the
European Union as a whole. The slowdown in the rate of growth became evident
in the fourth quarter of 2007, with GDP in the euro area only 0.4% up on the
previous quarter. Both domestic demand and foreign trade slowed. Private
consumption is suffering from the effects of the increase in inflation
linked to the sharp rise in energy and food prices. However, the fact that
the situation on the employment market is still favourable is helping to
prop up consumption. Enterprises' own high level of profitability and their
sound financial situation are positive factors too. On the trade front, the
contribution of exports to growth should start to feel the effects of the
slowdown in the US economy and, undoubtedly, of the strength of the euro. So
far, they seem to be resisting the pressures fairly well, against a backdrop
of a global growth rate that nevertheless remains sustained.
At any rate, on the basis of the information it had
by mid-March, the OECD scarcely modified its growth forecasts for the big
European economies in 2008 compared with the December 2007 estimates. These
estimates are consistent with the Commission's adjusted figures of February
2008.
The international economic context used in the
January 2008 Economic Budget was therefore still a globally valid benchmark
at the time the Budget was being drawn up. However, the elements of doubt
have obviously built up over time and the risk factors are now leaning more
heavily towards the possibility of less favourable performance than had been
hoped. For instance, the ECB's March 2008 macroeconomic projections, which
were not available when the Budget was finalised, grant a higher probability
to the likelihood of a slightly sharper economic slowdown than had been
forecast at the end of 2007.
