Marked Slowdown in the EU's Foreign Trade, but Upswing in Domestic Demand

The European economy grew by 2.8 percent (euro area +3.0 percent) in 1998, the highest rate since 1994. Production and demand peaked in the first half of the year, when export still expanded at a lively pace. At first, the currency crises in South-East Asia had little effect on the EU's foreign trade. Starting in the second half of the year, however, the plunge in output in the Asian crisis countries together with the onset of the economic and financial crisis in Russia left deep marks in foreign trade. During the course of 1998, the business climate deteriorated significantly. Output in manufacturing declined by 2½ percent from its peak in July to December.