In a recent report, the European Bank for Reconstruction and Development (EBRD) reviews the economic growths recorded by Baltic and Central European states, South-Eastern Europe and Turkey, Eastern Europe and the Caucasus, as well as Russia and Central Asia. The EBRD region is recovering from the crisis, but with sharp variations from country to country, these variations being determined by the increasing price of raw materials, capital flows and other factors involved in economic activities.
Therefore, overall prospects for the EBRD region consist in 4.2% growths for 2010 and 4.1% for 2011.
Initially, the bank estimated a growth in economies of 3.5% and 3.9% respectively. “This is precisely the time that the process of structural reform needs to be accelerated to strengthen productivity, underpin fiscal sustainability and shift countries towards a more balanced growth model. The region needed to rebalance: rely more on domestic sources of funding, develop local capital markets and improve competitiveness through cost containment as well as productivity-enhanced investments”, declared Erik Berglof, Chief Economist.
In what concerns the external demand, South-Eastern Europe is exposed to a weaker demand compared to the rest of the region due to the export connections with Greece and with the other countries in the region who recover rather slowly. Conversely, freight forwarders will benefit from a rapid extension of external demand, as well as freight forwarders in Latin America, Middle East or North America. In terms of competitiveness, the EBRD reports shows a slow rhythm of recovery, especially in countries with fixed exchange rate regimes. The sharp devaluations during the crisis has stimulated the competitiveness of exporters in Hungary, Poland, Turkey, Russia, Ukraine, Central Asia and the Caucasus region.
The Baltic States and those in Central Europe have benefited from a much stronger recovery than previously estimated in Western Europe. Countries have open economies (with export rates of 80% of GDP in Hungary, Slovakia and the Baltic States) and are extremely dependent on foreign direct investments in their most dynamic sectors, such as international trade, equipments and other capital goods shipped to other emerging countries.
“Baltic countries will likely exceed our 2010 growth projections, benefiting from the improved environment in the EU. Hungary has known three consecutive quarters of growth, Poland has a relatively strong growth due to domestic demand, Croatia continues to be dragged down by commitments in the public sector and in key industries and needs significant state funding. Also, Slovenia will record a modest growth, while Slovakia will face recovery in exports with a 4% growth in 2010”, shows the EBRD report.
The South-Eastern European region continues to remain behind other transition regions, especially in what concerns the post-crisis recovery rhythm, except for Turkey who experienced a rapid growth. The most dynamic sector is exports which goes upwards in most countries.
Economic forecasts improved in the past months for recent EU member states (Romania and Bulgaria), who showed different signs of recovery. For Romania, figures remain modest and the government is seeking to manage the IMF loans and to implement the austerity programme. In Western Balkans, all countries will record growths, except for Montenegro where credit growth remains negative. Bosnia and Herzegovina, FYR Macedonia and Serbia are benefiting from global demand for key metal commodities, and in Serbia, a major programme of infrastructure development is underway. The highest growth rate this year is, once again, projected to be in Albania, but this country is particularly vulnerable to a serious Greek downturn.
In Turkey, the current strong rebound is expected to last into early 2011. Strong capital inflows, rising credit growth, and some moderate fiscal stimulus have supported rapid real GDP growth based on expanding domestic demand.
East European and Caucasus countries have benefited from a significant growth in external demand and in the price of raw materials. Countries such as Armenia, Azerbaijan, Belarus, Georgia, the Republic of Moldova and Ukraine have experienced growths due to exports and funding.
In Central Asia, Russia’s economy in 2010 grew 4.4%. Kazakhstan’s economy is also recovering with a 6% growth as a result of industrial production (coal extraction, oil, copper and other minerals). In 2010,
the economy in Uzbekistan will grow 8.2%, in Tajikistan 5.5% and in Turkmenistan 11%. Economic growths in the three countries are expected to have the same value in 2011.
by Pamela Luică
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