The influence of the U.S. crisis on global economy is twofold: on trade, and financial and capital markets. Doubtless U.S. economy is the strongest economy in the world and its slowing down will hamper the economies of other countries – especially those which export a lot to the U.S. market. In 2007 domestic consumption in the U.S. came to $9.5 billion. Its fall will bear negatively on global demand. An additional problem for European and Asian exporters to the U.S. is the falling dollar.
The U.S. crisis, which raised the need for financial means of the institutions it touched, also lowered mutual confidence levels. Through the capital markets the crisis reached the global stock market and brought quotations down, which had an adverse effect on stokbrokerage and investment fund earnings. The worldwide stock market slump makes for high insecurity and raises risk levels, which translates into a worsening of investor sentiment and could make recession forecasts a self-fulfilling prophecy. There is a serious threat of the financial market’s troubles extending onto the economy proper. In the U.S. mortgage loans are tied to globally-functioning derivative instruments and for this reason losses suffered by American banks worsen the situation of financial institutions elsewhere. In global economy the permeation effect mainly takes place via the financial channel. In Europe U.S.-similar real-estate-market troubles have been recorded in Britain, Ireland and Spain.
Right now the crisis is mainly visible in advanced countries and it seems that it will be least harmful for the developing economies – mainly because their economic ties to Europe are closer than to the U.S. and the fact that their growth mainly hinges on domestic consumption.

The developing economies
(including China, India and Russia) have taken over the role of global powerhorse. According to the International Monetary Fund China at the moment accounts for one-fourth of global GDP growth, Russia, Brasil and India for one half, and all the developing countries together for two-thirds. The global slowdown will be compensated by the rapid growth of China and India. Chinese economy is driven by the domestic market and investment, most notably the organization of the Beijing Olympic Games and Expo. At the same time China owes a part of its growth to exports, 20% of which go to the U.S. (recession boosts the market for cheap products, of which China is a major supplier). China’s flourishing investment market promises to keep raw-material prices at their present level despite the worldwide slump. The high prices may help raw-material-exporting developing economies cope with the U.S. crisis. China’s huge, almost $2 billion currency reserve together with the country’s good access to international funds and expansive policy may help sustain the present global economic growth rate.
Represented by powerful investment funds, Asian and Mideastern capital is increasingly penetrating to crisis-torn financial institutions in the West. This capital helps insolvent banks, which is a key factor in U.S. and global economy. It is estimated that the United States’ crisis-ridden economy with its unchanging trade and budget deficits needs about $2 billion in foreign capital daily. Moreover, for some time now Asian banks have been storing enormous dollar reserves, thus becoming the U.S. currency’s stability safeguards. Currency reserve reshuffles and sellouts could depreciate the dollar and ruin many a bank. Financial aid is forwarded in exchange for shares, but political motives will probably appear together with the influx on “state” money. This could reverse the balance of forces in global economy to the advantage of to-date creditees in Asia and the Mideast. Already visible today is a re-routing of global capital flow. Measured in commercial terms the turnabout on the global investment market came in 1999 following the crises in Asia, Brasil and Russia.

In Europe
the crisis promises to take a milder course. The Euro countries have a rather steady and balanced trade and considerable financial reserves. Unemployment in the Euro zone is low (7.1% last January), as it is in the entire EU (6,7% at the close of 2007). Commercial optimism in Germany, France, Italy and Belgium is on a steady rise since December 2007. The global demand for their products has remained on a stable level, and in effect so have the high earnings of their commercial sectors. It must be borne in mind, however, that the mortgage credit crisis causes banks to curb their credit offer, which transfers into higher capital acquisition costs for enterprisers.
The Euro zone’s economic driving force is consumption, on the rise thanks to lower unemoployment and rising wages (especially in Germany). A pitfall for the Euro countries could be their external markets. The U.S. takes 13% of the Euro zone’s exportware, but since the onset of the crisis this has been going down. The impact of the U.S. crisis on Europe will depend on the response to it of the rising economies. Another adversity for exporters is the rising Euro rate. In view of the high inflation (3,2% over January, February and March 2008), the European Central Bank has left interest rates unchanged at 4%. This means that the Euro will continue on its present high course.

Crucial for economic growth in Poland
will be investment in infrastructure and EU-cofinanced commercial projects. Another driving force will be domestic consumption fuelled by falling unemployment and rising wages.
There are no indications of an impeding financial crisis in Poland. The current account deficit is below 4% GDP, the per-capita foreign currency debt is low against Bulgaria, Romania and Hungary (in more stable times such a deficit would not be considered dangerous, nonetheless the present situation has led to the lowering of security thresholds). Poland will rather not repeat the U.S. scenario as the Polish real-estate branch is in a rather fledgling phase with a less-than-10% share in the capital market. Moereover, the Warsaw Stock Exchange is rather low on capital and in effect has hardly any influence on Polish macroeconomy.
Poland’s economic growth could be endangered by a mass investor retreat from the developing countries caused by their financial instability. In such a case falling quotations could hinder capital acquisition on the stock market and bring enterpriser moods down, which in turn will have an negative bearing on their investment and employment decisions. An investor exodus from the rising countries could also bring financial stock prices down and in effect devaluate the PLN. The export market would be more competitive, however this would be accompanied by an inflation rise caused by the appearance additional domestic money. However it appears that Poland with its solid macroeconomic foundations is rather int he group of crisis-safe countries from which capital will not flee. More expected is an influx on portfolio capital, which could appreciate the PLN. This in turn would boost production costs and lower competitiveness. The effect would be falling exports and rising imports, which would further raise the current account debt and deepen the economic slowdown.
The U.S. crisis will be hardest for exporters, although it must be remembered that Poland’s trade with the U.S. is rather low. An indirect threat to Polish economy could be a slowing in the Euro countries, to which Poland sells 60% of its exportware. Economy Ministry surveys show that a one-point change in Euro zone GDP growth translates into 3 points in Poland.
Global inflation will continue as a steady influence on Polish economy. Instability on global markets coupled with internal factors like a rising trade deficit and mounting wage and price pressure may increase the PLN’s fluctuations and boost long-term interest rates. Price growth in Poland is kept at a reasonable level by raising interest rates in Poland simultaneously with their lowering abroad. This attracts short-term capital and has a strengthening influence on the PLN. Also, the PLN’s high rate to the dollar enables cheaper purchases on world markets of increasingly more expensive raw-materials.