ANNUAL REPORT 2008 - Polymer Bank Notes of the World

3 ECONOMIC AND MONETARY DEVELOPMENTSIN NON-EURO AREA EU MEMBER STATESECONOMIC ACTIVITYIn most non-euro area EU Member Stateseconomic growth declined in the course of 2008following several years of robust expansion(see Table 6). 1 While this pattern of slowingeconomic activity was observed across almostall of the countries, annual GDP growth ratesand the extent of the slowdown differedconsiderably.The Baltic States experienced the mostpronounced slowdown, with average annualgrowth more than halving in Lithuaniacompared with the previous year and turningnegative in Estonia and Latvia. In all threecountries these developments followed severalyears of very strong growth in economicactivity, accompanied by exceptionally strongincreases in wages, credit and inflation, as wellas very large current account deficits. Indeed,macroeconomic imbalances in the Baltic Statesremained large in 2008, notwithstanding thepartial correction observed in the course of theyear.intensifying financial crisis. Tighter financingconditions and falling asset prices weakenedconsumer and industrial confidence anddampened domestic demand.The deceleration of economic growth in Slovakia,from 10.4% in 2007 to 6.4% in 2008, was inpart a normalisation following exceptionallyhigh growth in the previous year. In Hungary,the very low annual growth of 0.5% in 2008reflects the lagged impact of the sizeable fiscalconsolidation package in 2007, from whichthe economy started to recover slowly in 2008,combined with the subsequent impact of thefinancial crisis on the economy. In the threenon-euro area EU Member States that joinedthe EU before 2004, the impact of the financialcrisis was equally pronounced, resulting inannual GDP growth rates for 2008 of 0.7% in theUnited Kingdom, -0.2% in Sweden and -1.3% inDenmark. Economic activity in Poland and theCzech Republic appears to have been affected toa somewhat lesser extent, decelerating in 2008to 5.4% and 3.2% respectively. While RomaniaThe deceleration in GDP growth in most othernon-euro area EU Member States was drivenmainly by the weakening external environmentand, later in the year, by the direct impact of the1The non-euro area EU Member States referred to in this sectioncomprise the 12 EU Member States outside the euro area in theperiod to the end of December 2008 (i.e. Bulgaria, the CzechRepublic, Denmark, Estonia, Latvia, Lithuania, Hungary, Poland,Romania, Slovakia, Sweden and the United Kingdom).Table 6 Real GDP growth in the non-euro area EU Member States and the euro area(annual percentage changes)2004 2005 2006 2007 2008 2008 2008 2008 2008Q1 Q2 Q3 Q4Bulgaria 6.6 6.2 6.3 6.2 6.0 7.0 7.1 6.8 3.5Czech Republic 4.5 6.3 6.8 6.0 3.2 4.4 4.4 4.0 0.2Denmark 2.3 2.4 3.3 1.6 -1.3 -0.7 0.8 -1.6 -3.9Estonia 7.5 9.2 10.4 6.3 -3.6 0.2 -1.1 -3.5 -9.7Latvia 8.7 10.6 12.2 10.0 -4.6 0.5 -1.9 -5.2 -10.3Lithuania 7.4 7.8 7.8 8.9 3.1 7.0 5.2 2.9 -2.0Hungary 4.8 4.0 4.1 1.1 0.5 1.7 2.0 0.8 -2.3Poland 5.3 3.6 6.2 6.6 5.4 6.2 5.8 5.2 2.3Romania 8.5 4.2 7.9 6.2 7.1 8.2 9.3 9.2 2.9Slovakia 5.2 6.5 8.5 10.4 6.4 9.3 7.9 6.6 2.5Sweden 4.1 3.3 4.2 2.6 -0.2 0.9 3.0 0.3 -4.9United Kingdom 2.8 2.1 2.8 3.0 0.7 2.3 3.2 1.8 .EU9 1) 5.8 4.9 6.7 6.2 4.3 5.7 5.5 4.7 0.9EU12 2) 3.6 2.9 3.9 3.6 1.3 2.7 3.5 2.2 .Euro area 2.1 1.7 2.9 2.6 0.8 1.9 2.0 0.8 -1.4Sources: Eurostat and national sources.Note: Data are non-seasonally adjusted for all countries.1) The EU9 aggregate comprises the nine non-euro area EU Member States that joined the EU on 1 May 2004 or 1 January 2007.2) The EU12 aggregate comprises the 12 non-euro area EU Member States as at 31 December 2008.86 ECBAnnual Report2008