The year 2008 can be called a year of extremes, beginning in the shadow of the assassination of former Pakistani Prime Minister Benazir Bhutto just days earlier and ending with the terror attacks on Mumbai along with a global financial crisis and economic meltdown that has spread global despair. History was created with the first African American winning the US Presidential Elections. The Olympics brought a golden chance for China to display its soft power, Nepalese citizens elected a 601-member Constituent Assembly and Bhutan has transitioned from a century-old absolute monarchy to democracy.
Economically, 2008 was one of the most turbulent years in the past few decades. The World slipped into a whopping recession that reminds economists all over the globe of the Great Depression of 1929-30.
World Economy & GDP Growth in 2008
The year 2008 began with Northern Rock being nationalized and ended with the biggest financial scam in the history of the world. During the year, one of America 's Big Four investment banks, Lehman Brothers was allowed to go to the wall by US regulators in September; while Bank of America took over Merrill Lynch the same day. It all started with
the subprime problems in USA that emerged towards H2-2007 and caused banks financial problems. After the near-collapse and subsequent bailout of 58 year old investment firm Bear Stearns in March, markets found some degree of stability and even gained back some ground until May. But, as more Wall Street institutions crumbled on investments linked to bad home loans; fresh selling hurt stocks. After Lehman Brothers went bankrupt, stock markets set multi-decade records for lows reached and big swings registered. The Dow plunged to its worst point drop on record, down 777 points, on September 29. Investors lost trillions of dollars and US stocks prices plunged to 11 year lows. The market capitalization of General Motors is now lower than it was in 1927. The auto industry of not only USA but other regions has been going through negative growth or faced with financial problems. Borrowing costs for companies surged. Banks became increasingly unwilling to lend to each other, as more took huge write-downs from bad assets. Oil also played a spoilt sport by peaking to all time highs of US$147/barrel in 2008. What startled the World, however, was the brisk pace of fall from all time highs to 4 year lows from US$147/barrel in July to US$36/barrel in early December.
Prediction of world gross domestic product (GDP) growth in 2008 has been down revised to 2.1% from the projections of 2.7-2.5% made on 10th December 2008. Next year is likely to be even worse, with current expectation of GDP growth in 2009 being pegged at 0.9%. Asia is also facing heat from the global economic weakness, with both China and India expecting to have lower economic growth in 2008. This year, GDP growth in China has been projected to slow to around 9% from around 11%. China's growth has principally depended on strong exports springing from global demand, which in turn is dependent on the robust health of its major trading partners. Hence the economy will be deeply impacted by shrinking exports, particularly to USA-its largest trading partner. Exports will continue to decline amid shrinking overseas demand and waning consumption unlikely to rebound in a short period amid the economic crisis. For 2009, Chinese authorities are trying to boost growth with the announcement of a US$583.94 bln fiscal stimulus package. India may end up between 6.5-7% in 2008 although the Government is hopeful that it may reach 7.5%. GDP growth in Asia is expected to be 7% in 2008 compared to 9% in 2007. Brazil and Russia - the two other large economies also are estimated to show 4% and 6% GDP growth in 2008. USA , the largest economy in the World would possibly show 0.4% GDP growth in 2008. European Union is expected to clock less than 0.5% GDP growth in 2008. Japan is expected to show a negative growth of 0.4 % in its GDP in 2008.
Governments around the world have ramped up spending to try to cushion the economic blow of the worst financial crisis in 80 years. Companies across continents are facing evaporating demand, which has prompted many of them to drastically cut jobs and investment. The coming months are predicted to be very bad. Arresting this loss of confidence, providing economic stimulus and if necessary, replacing private demand are essential to prevent the recession from turning into a Great Depression.