6 July 2007

By the end of 2006, most analysts expected a sharp downturn in the housing market of the United States, along with its large and persistent current account deficit, to be among the major downward risks to world economic growth in 2007. In fact, the growth did slow down in the United States in the first months of 2007, but the housing recession seemed to remain confined to the housing sector and the spillover impact on world markets was rather limited, according to the recent economic data.

As our chart demonstrates, many countries in Europe as well as Canada and Japan enjoyed a relatively comfortable economic expansion in the first quarter of 2007. In the Baltic economies, Slovakia and Slovenia the quarterly growth of GDP was above 2 per cent (seasonally adjusted), while in the rest of Europe it ranged between 0.3 per cent in Italy and 1.6 per cent in Poland. Nevertheless, in the medium to longer run, the balance of risks remains on the downside owing mainly to fears of a rise in protectionist pressures, further increase in oil prices and persistent global imbalances.

Source: UNECE Statistical database (http://www.unece.org/stats/data)