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The year 1998

After it had become impossible to ignore the signs of a severe oncoming recession (as early as the autumn of the previous year), the development of the global economy in 1998 was dictated by the currency and financial crisis in the Far East and South East Asia, the persistent poor condition of the Japanese economy and Russia's economic difficulties. Whilst Hong Kong, Singapore, South Korea, Taiwan, Thailand, Malaysia, Indonesia and the People's Republic of China were regarded in the 1990s as particularly dynamic economic regions, in some cases categorised by the International Monetary Fund as “advanced economies” since 1997 (Hong Kong, Singapore, South Korea, Taiwan), this rapid rate of growth came to a sudden end. Numerous investments (above all in Thailand and Malaysia) were based on irresponsibly issued loans granted by the banks on the assumption of continuing growth rates. In 1997/1998, these institutions encountered great difficulties threatening their existence, as there were more and more instances of these loans not being repaid. Furthermore, the crisis was greatly exacerbated by the severe overvaluation of many far Eastern currencies, the temporarily horrendous level of foreign debt and the recession at the time in Japan, one of the most important trading partners in the region. This led to the collapse of banks and currencies, falling prices, company insolvencies and mass redundancies. In Indonesia, for example, gross domestic product fell by 13.7 percent, in Thailand by 8 percent, in South Korea by 5.5 percent and in Hong Kong by 5.1 percent.

Overall, the German economy managed to sustain its position throughout the crisis in the Far East, increasing its gross domestic product by 2.8 percent in real terms. Investments in plant and equipment increased, private consumption remained on a level plane and the number of people in employment rose. Thanks to its willingness to undertake innovation and the high demands for its high-tech products, mechanical engineering was one of the most profitable branches of industry with a rate of growth of 6.3 percent. By way of contrast, the chemicals industry felt the full force of the crisis in the Far East. With exports to the Far East (and Latin America) falling sharply, overall sales in the sector were down by 1.6 percent.

Annual report 1998 (German)
Financial statements 1998 (German)