In 2006, global economic growth was above the average of previous years with a rise of 5.1 percent. The upswing in the global economy is thus continuing and is even stronger than anticipated a year ago. The decisive impetus has come from the newly industrialized countries. Rapidly developing regions such as Asia, Latin America and Central and Eastern Europe were among the growth centers in 2006. Growth in the U.S. evidenced a mild downswing.

Performance of significant currencies

Key foreign currencies that affect Software AG’s business include the U.S. dollar, the British pound, the South African rand, and the Canadian dollar. The average exchange rate of the Euro to the U.S. dollar remained stable.

The exchange rates used for the translation of the most important currencies have changed as follows compared to the previous year:

Closing rate (€1)	Dec. 31, 2006	Dec. 31, 2005	Exchange rate change in %
U.S. dollar	1.3184	1.1833	– 11.4
Pound sterling	0.6716	0.6874	+ 2.3
Swiss franc	1.6077	1.5556	– 3.3
South African rand	9.2300	7.4900	– 23.2
Australian dollar	1.6698	1.6150	– 3.4

 

Average rate (€1)	2006	2005	Exchange rate change in %
U.S. dollar	1.2557	1.2449	– 0.9
Pound sterling	0.6818	0.6840	+ 0.3
Swiss franc	1.5730	1.5482	– 1.6
South African rand	8.5143	7.9065	– 7.7
Australian dollar	1.6663	1.6311	– 2.2

Source: Commerzbank AG, Frankfurt

USA

The economy in the U.S. cooled slightly during the course of the year. According to OECD calculations, the real gross domestic product rose 3.3 percent. During the third quarter, the U.S. economy expanded more slowly than in the past three years. There was, however, a modest recovery in December with above-average growth. On the whole, higher interest rates, rising gasoline prices, and weaknesses in the real estate sector had a negative impact on consumer spending.

Europe

Europe’s economy profited from the flourishing global economy and evidenced a clear recovery. The economic growth amounted to a total of 2.6 percent. The Russian economy, with a production increase of 6.5 percent, continued to show strong growth.

The eurozone countries benefited from slightly improved exchange rate parities. The rise in the gross domestic product of 2.6 percent exceeded that of the previous year. The German economy also expanded, growing by 2.6 percent as the result of increasing domestic demand. Growth impetus was provided by investments in equipment and, once again, from the export sector. In the second half of the year, the German economy benefited from a renewed rise in capital spending. Private consumption showed a more negligible increase.

Asia

The dynamic upswing continued in Asian countries in 2006. The Chinese economy expanded at a rate of 10.5 percent. Exports and sharply higher capital expenditure spurred growth. Economies in the other emerging nations of Southeast Asia also achieved high growth rates. The Japanese economy remained stable thanks to higher domestic demand.

Latin America

The South American economy revived considerably due to high demand for raw materials and agricultural products. Chile was among the countries showing higher than average economic growth, with a rise in GDP of 5.2 percent. In Latin America, growth exceeded 5 percent for the third consecutive year. Venezuela achieved unusually high growth of 7.5 percent.