Ifo World Economic Climate index falls clearly

The Ifo World Economic Climate worsened clearly in the first quarter of 2008. The indicator fell to its lowest level since mid-2003. Both the assessments of the current economic situation as well as the expectations for the coming six months are more unfavourable than in the previous survey. In the opinion of the WES experts, the US subprime crisis is critically affecting, apart from the US, the financial systems of the UK, Switzerland, Ireland and Germany. The negative impact will be concentrated on the first half of 2008 and will weaken thereafter. For the first time since the end of 2003, a majority of WES experts expects a decline in central bank interest rates. In their opinion, the increase in long-term interest rates should come to a standstill in the coming six months. The US dollar and the Japanese yen are still seen as undervalued. In contrast, the euro and the British pound are still considered to be overvalued by the WES experts. Independent of the fundamental assessments of the currencies, they expect the US dollar to continue to weaken in the coming six months.