ANNUAL REPORT 2008 - Polymer Bank Notes of the World

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Table 3 Composition of real GDP growth(percentage changes, unless otherwise indicated; seasonally adjusted)Annual rates 1) Quarterly rates 2)2006 2007 2008 2007 2008 2008 2008 2008 2007 2008 2008 2008 2008Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4Real gross domestic product 3.0 2.7 0.8 2.2 2.1 1.5 0.7 -1.2 0.3 0.7 -0.2 -0.2 -1.5of which:Domestic demand 3) 2.9 2.4 . 2.1 1.7 1.1 0.8 . 0.1 0.6 -0.3 0.4 .Private consumption 2.1 1.7 . 1.3 1.3 0.4 0.1 . 0.2 0.0 -0.2 0.1 .Government consumption 1.9 2.2 . 2.0 1.4 2.0 2.2 . 0.3 0.3 0.8 0.7 .Gross fixed capital formation 5.8 4.2 . 3.2 3.7 2.6 0.9 . 1.0 1.4 -0.9 -0.6 .Changes in inventories 4) 0.0 0.0 . 0.2 -0.1 -0.2 0.1 . -0.3 0.2 -0.2 0.4 .Net exports 3) 0.2 0.3 . 0.1 0.4 0.4 -0.1 . 0.3 0.1 0.1 -0.6 .Exports 5) 8.6 6.0 . 4.0 5.3 3.9 2.0 . 0.5 1.7 -0.1 0.0 .Imports 5) 8.4 5.4 . 3.9 4.4 3.1 2.2 . -0.2 1.6 -0.5 1.4 .Real gross value addedof which:Industry excluding construction 3.9 3.6 . 3.3 2.7 1.3 -1.1 . 0.5 0.2 -0.6 -1.3 .Construction 3.0 3.2 . 1.7 2.8 1.6 0.4 . 0.9 2.6 -1.8 -1.2 .Purely market-related services 6) 3.6 3.2 . 2.7 2.6 1.9 1.2 . 0.4 0.6 0.2 0.0 .Sources: Eurostat and ECB calculations.Notes: The figures reported are seasonally and partly working day-adjusted, as not all euro area countries report quarterly national accountseries adjusted for the number of working days. Data refer to the euro area including Slovakia.1) Percentage change compared with the same period a year earlier.2) Percentage change compared with the previous quarter.3) As a contribution to real GDP growth; in percentage points.4) Including acquisitions less disposals of valuables.5) Exports and imports cover goods and services and include internal cross-border trade in the euro area. Since intra-euro area trade is notcancelled out in import and export figures used in national accounts, these data are not fully comparable with balance of payments data.6) Includes trade and repairs, hotels and restaurants, transport and communication, financial intermediation, real estate, renting andbusiness activities.From September 2008 the sudden andextraordinary intensification and broadening ofthe financial turmoil and the ensuing heighteneduncertainties led to a rapid contraction of euroarea GDP (-1.5% quarter on quarter). Firmsstarted to react forcefully to the rapid depletionof order books, postponing expansion plans andcutting inventories in the face of costlier andreduced access to financing, while householdsincreased their savings in reaction to theincreased uncertainty about short-term jobprospects and to negative wealth effects.THE SLOWDOWN IN GDP GROWTH WASBROAD-BASEDThe weakening in demand during 2008 wasbroadly based across GDP components. Externaldemand slowed as activity in advanced economiesdecelerated and emerging markets becameincreasingly affected by the financial turmoil.Domestic demand also softened considerably.Rising commodity prices strongly affectedhouseholds’ real income in the first half of theyear, while cooling housing markets led to arapid decline in residential investment. Waningcapacity pressures, renewed uncertainty andtighter financing conditions led to cuts in corporateinvestment.Faced with subdued real income growth, fallingfinancial wealth, tightening credit conditions andworsening labour market prospects, householdspending moderated considerably in the courseof the year, with private consumption growingby around 0.6% in 2008 as a whole – fully onaccount of the carry-over effect from 2007 on theyearly growth rate, as during 2008 consumptionincreased in only one quarter – compared with1.7% in 2007. Although nominal householdincome growth was reasonably robust duringmost of the year, owing to the solid growth incompensation of employees (resulting from theacceleration in compensation per employee andstill resilient employment), the real disposableincome of households came under significantdownward pressure from accelerating HICPinflation. Large increases in commodityprices raised the cost of households’ typicalECBAnnual Report200863
Chart 29 Contributions to quarterly realGDP growthChart 30 Confidence indicators(quarterly percentage point contributions; seasonally adjusted)1.51.00.50.0-0.5-1.0-1.5-2.0real GDP 1)final domestic demand 2)net exports2002 2003 2004 2005 2006 20072008-0.5-1.0-1.5-2.0Sources: Eurostat and ECB calculations.1) Percentage change compared with the previous quarter.2) Defined as domestic demand excluding changes in inventories.consumption basket, and year-on-year growth inreal household disposable income fell to its lowestrate since 2003 (to around 0.7% on average in thefirst three quarters of 2008). Households reactedcautiously, choosing to retrench spending ratherthan to smooth consumption and reduce savings.While the recent cycle has generally beencharacterised by relatively subdued householdspending, the ongoing financial turmoil islikely to have been an additional factor behindhouseholds’ reluctance to spend. Large fallsin financial wealth as stock markets slumpedcaused households – either because some ofthe losses were perceived to be permanentor because uncertainty about the economicoutlook was heightened – to reduce expenditureand build up precautionary savings. Thedeteriorating outlook for the labour market alsocontributed to a decline in consumer sentiment.Consumer confidence indicators, which hadpeaked in mid-2007, fell to their long-termaverage levels in the early months of 2008,sharply deteriorating further to reach very lowlevels by the end of the year (see Chart 30).1.51.00.50.0(percentage balances; seasonally adjusted)151050-5-10-15-20-25-30-35-40consumer confidenceindustrial confidenceservices confidence2002 2003 2004 2005 2006 2007 2008Source: European Commission Business and Consumer Surveys.Note: Data shown are calculated as deviations from the averageover the period since January 1985 for consumer and industrialconfidence, and since April 1995 for services confidence.Total investment growth declined sharply toaround 0.6% in 2008 following two years ofelevated growth (5.8% in 2006 and 4.2% in2007), with quarter-on-quarter contractions inthe last three quarters offsetting the positivecarry-over effects from 2007 and a strong firstquarter that benefited from unusually goodweather (with the latter mechanically depressingthe figures for the second quarter). Thisdeceleration was more marked for residentialinvestment than for other private investment.Indeed, housing investment contracted in 2008,following the end of the expansionary phaseof the residential construction cycle in 2007 inthe context of slowing house price growth. Thedeceleration was generally more pronounced incountries that had experienced very fast growthin previous years. The Eurosystem’s banklending survey also indicated a considerabledrop in demand for loans for house purchasesince the start of the financial turmoil insummer 2007, reflecting the downturn in thehousing market. At the same time, there was asubstantial tightening in credit conditions.151050-5-10-15-20-25-30-35-4064 ECBAnnual Report2008
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EN2008EUROPEAN CENTRAL BANK ANNUAL
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© European Central Bank, 2009Addre
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CHAPTER 4FINANCIAL STABILITY AND IN
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7 Statistical accounting consequenc
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ABBREVIATIONSCOUNTRIESOTHERSBE Belg
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in the course of the year, in line
Page 14 and 15: currencies, T2S will be a major ste
Page 16 and 17: CHAPTER 1ECONOMICDEVELOPMENTS ANDMO
Page 18 and 19: Chart 1 ECB interest rates and mone
Page 20 and 21: Despite moderating, the annual grow
Page 22 and 23: substantial downward revisions in r
Page 24 and 25: in July, annual inflation in the OE
Page 26 and 27: As regards the Chinese economy, rea
Page 28 and 29: generally tighter financing conditi
Page 30 and 31: were recorded in December, but thes
Page 32 and 33: was driven mainly by developments i
Page 34 and 35: market tensions, particularly for l
Page 36 and 37: anking and financial system. At the
Page 38 and 39: cash flows to compensate for a redu
Page 40 and 41: quarter of 2008 and -0.1% in Decemb
Page 42 and 43: whereby investors’ uncertainty su
Page 44 and 45: September onwards, amid the great u
Page 46 and 47: Chart C Trading volumes for governm
Page 48 and 49: sponsored rescue plans were initiat
Page 50 and 51: The annual growth rate of consumer
Page 52 and 53: end of 2007. By December 2008 this
Page 54 and 55: calculated as the balance between g
Page 56 and 57: commodity prices (see Box 4). Conve
Page 58 and 59: Chart D Longer-term inflation expec
Page 60 and 61: apidly to 1.7% in December, mainly
Page 62 and 63: productivity slowed to 0.2% in the
Page 66 and 67: Corporate investment, which had exp
Page 68 and 69: Box 5LABOUR MARKET DEVELOPMENTS IN
Page 70 and 71: Chart C Breakdown of employment gro
Page 72 and 73: Box 6DEVELOPMENTS IN THE ISSUANCE A
Page 74 and 75: Chart B Government bond yield sprea
Page 76 and 77: Box 7STATISTICAL ACCOUNTING CONSEQU
Page 78 and 79: warranted because of the need to co
Page 80 and 81: sharp depreciation of the euro was
Page 82 and 83: prices in the first eight months of
Page 84 and 85: focused more on the production rath
Page 86 and 87: segments and, in turn, affected eur
Page 88 and 89: and Bulgaria registered robust grow
Page 90 and 91: In the remaining non-euro area EU c
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Page 94 and 95: Table 10 Official monetary policy s
Page 96 and 97: the Bank of England and Sveriges Ri
Page 98 and 99: CHAPTER 2CENTRAL BANKOPERATIONSAND
Page 100 and 101: Box 10MONETARY POLICY OPERATIONS DU
Page 102 and 103: Chart A Liquidity supply through op
Page 104 and 105: franc funding needs of banks with n
Page 106 and 107: MINIMUM RESERVE SYSTEMCredit instit
Page 108 and 109: with the ample allotments in the fi
Page 110 and 111: 2008. By contrast, the average shar
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and the ECB). As a result of carefu
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cross-CSD settlement. T2S will thus
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ELIGIBLE LINKS BETWEEN NATIONAL SEC
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Chart 48 Number of euro banknotes i
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3.3 BANKNOTE PRODUCTION AND ISSUANC
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4 STATISTICSThe ECB, assisted by th
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iii) payments statistics and iv) de
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5 ECONOMIC RESEARCHThe main functio
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were organised to disseminate resea
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the Financial Collateral Directive,
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on the Banque centrale du Luxembour
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standards by individual Eurosystem
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CHAPTER 3ENTRY OF SLOVAKIAINTO THE
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Table 13 Main economic indicators f
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As of January 2009 Slovakia is thus
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3 OPERATIONAL ASPECTS OF THE INTEGR
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4 THE CASH CHANGEOVER IN SLOVAKIATH
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Willem F. Duisenberg accepting the
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1 FINANCIAL STABILITYThe Eurosystem
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With regard to merger and acquisiti
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with the principles set out in Octo
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2.2 BANKINGCAPITAL REQUIREMENTS DIR
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3 FINANCIAL INTEGRATIONThe Eurosyst
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The market for short-term paper in
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de France and the Banca d’Italia.
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and the Eurosystem’s business con
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4.2 RETAIL PAYMENT SYSTEMS ANDINSTR
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for Clearing and Settlement, and th
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Willem F. Duisenberg at his farewel
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1 EUROPEAN ISSUESIn 2008 the ECB co
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for financial institutions, to faci
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1.3 DEVELOPMENTS IN AND RELATIONS W
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On a number of occasions in 2008, t
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countries have voiced support for t
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Former Italian President Carlo Azeg
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1 ACCOUNTABILITY VIS-À-VIS THE GEN
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implementation of the steps foresee
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CHAPTER 7EXTERNALCOMMUNICATION
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2 COMMUNICATION ACTIVITIESThe ECB a
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Panel at the Fifth ECB Central Bank
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1 DECISION-MAKING BODIES AND CORPOR
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Council decided on the main aspects
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1.3 THE EXECUTIVE BOARDThe Executiv
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1.4 THE GENERAL COUNCILThe General
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The Eurosystem/ESCB committees have
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members of the Executive Board. 13
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for their current position. On the
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statistical office (Statistisches B
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4 ANNUAL ACCOUNTS OF THE ECB212 ECB
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function, and by the Governing Coun
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BALANCE SHEET AS AT 31 DECEMBER 200
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PROFIT AND LOSS ACCOUNT FOR THE YEA
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mid-market prices on 30 December 20
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The defined benefit obligation is c
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NOTES ON THE BALANCE SHEET1 GOLD AN
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Eurosystem (see “Banknotes in cir
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(see “Banknotes in circulation”
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values at which the transactions we
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15 CAPITAL AND RESERVESCAPITALPursu
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epresenting the remainder of its ca
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NOTES ON THE PROFIT AND LOSS ACCOUN
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individual circumstances. Basic sal
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5 CONSOLIDATED BALANCE SHEET OF THE
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ANNEXES
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Number Title OJ referenceECB/2008/1
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Number Title OJ referenceECB/2009/1
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Number 2 Originator SubjectCON/2008
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Number 4 Originator Subject OJ refe
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oth the marginal lending facility a
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OVERVIEW OF THE ECB’S COMMUNICATI
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y the respective NCBs will also be
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OPEN MARKET OPERATIONS BY CURRENCYE
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USD operationsType oftransaction 1)
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DOCUMENTS PUBLISHED BY THEEUROPEAN
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95 “Financial stability challenge
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1012 “Petrodollars and imports of
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GLOSSARYThis glossary contains sele
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Economic analysis: one pillar of th
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Financial stability: condition in w
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MFIs (monetary financial institutio
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Reserve base: the sum of the eligib
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