This will force a retrenchment on the part of consumers and lead to the postponement of many investment decisions.Significantly weaker external demand will result in a sharp contraction in export volumes in 2009 for the first time since 1996.
Massive contraction in export demands, wrenching deceleration of growth, and exacerbated bad debts quickly forced many firms to downsize, and companies have been laying off employees by the hundred.
Thus, the effect of technical progress on marginal land and the consequent rise in wages is a contraction in export-oriented primary production and employment.
The Swiss economy joined several of its European neighbors in recession at the end of 2008 and has struggled since then from a sharp contraction in exports, with investment now being postponed.
"Activity in the banking and financial sector is falling very heavily and has been weighing on the economy over the past year, but the more recent story has been a sharp contraction in exports," said Bernard Lambert, an economist at private bank, Pictet.
The Czech economy has been resilient compared to neighbors like Hungary, though the economy shrunk 4.1 percent last year amid a sharp contraction in the export markets upon which the country depends.
That may be down a fraction from last year's 8%, but it would still be remarkably healthy for a country suffering from a sharp contraction in its export growth as a result of the global slowdown.
But the sharp contraction in German export orders, with sales in some industries such as machine tools falling by 60%, means that many firms are now burning cash and will soon need to replenish reserves, says Alexandra Böhne of the DIHK.Being very small will afford some protection.
This cautious optimism was checked by a weakening domestic manufacturing sector, which registered its eighth consecutive month of contraction in October as export demand and foreign investment sagged.
Tight credit conditions, the ongoing housing contraction and some slowing in export growth are likely to weigh on economic growth over the next few quarters.
In fact, this might cause the trade deficit to contract in 1H 2009 since the contraction in imports might well exceed the decline in exports, thus containing any negative contribution of trade to GDP growth.
