ROMSO Cyprus Knowledge Base

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Major events

Global economic context
The year 2004 saw some economic rebound and the end of the recession in the early 2000s. The dramatic rise in oil prices over the year, however, weighed on the recovery of the world economy. Strong contrasts remain between regions:
The U.S. economy is growing at a steady pace. Business investment remains at a high level, but household consumption is affected by the sharp rise in oil prices. Job creation continues to be at a high level.
The Asian (and especially Chinese) economy maintains strong momentum despite a slight decline from 2003.
Continental Europe, despite a rebound from 2003, is still lagging behind. After a good start at the beginning of the year, the momentum has run out: strong differences remain between the countries benefiting from a well-oriented internal demand (France, Spain) and those relying rather on the rebound of exports (Germany).

Americas

Activity accelerated rapidly in 2004 and GDP growth fell by 3%, driven by export dynamism. For the first time since 2002, the trade balance has contributed positively to GDP growth. The Bank of Canada announces that growth has exceeded expectations. The OECD estimates in its Economic Outlook that the Canadian economy is approaching its full capacity.

Price increases remain modest in 2003 at the beginning of 2004 as a result of excess production capacity. However, the increase in oil prices in 2004 caused a sharp decline in inflation, which exceeded 2% year-on-year in the second quarter. Despite a slight slowdown in inflation at the end of the year, the Bank of Canada decided to tighten its monetary policy twice in the fall of 2004 by raising its policy rate to 2.25% on the one hand and 2.5% on the other to counter inflationary risks. With the economic outlook darkening at the end of the year, the Bank of Canada is reducing its 2005 growth forecast to 2.9 instead of 3.5 per cent.

Europe

Asia

Oceania

Africa

Economic context in France

Macroeconomic indicators

Short-term trends in 2004
The economic situation in France improved in 2004 after a low growth phase between 2001 and 2003. French GDP growth reached 2.3% in 2004, its highest level since 2000. This is higher than the average growth of other euro area countries. However, the second half of the year marks a slowdown in growth after a particularly dynamic first half.

French domestic demand was particularly dynamic and its contribution to growth was +2.5%. On the other hand, trade, marked by a deterioration in the trade balance in 2004, accounts for a negative contribution of -1.5%. Finally, changes in stocks