Central, Eastern Europe to lead economic recovery
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Economic recovery in Middle and Eastern Europe is tardy but following the trend of healthy development and this region is expected to even become the leader in Europe's economic recovery, according to the latest summer forecast issued by The Vienna Institute for International Economic Studies (WIIW) on Thursday,
In a press conference of releasing the summer forecast, expert of the WIIW Mario Holzner noted that, in Central and Eastern European countries, particularly in those countries with an industry share of at least one quarter of gross domestic product, the recovery trend is more significant.
In this region, economies of Turkey, Russia and Ukraine had relatively higher growth rate, respectively reached 6.3, 4.0 and 3. 8 percent, indicating that these countries have entered into the recovery stage.
However, for Latvia it was expected to be minus 3.5 percent, while Lithuania and Croatia have the same growth of minus 1.5 percent, being in the recession.
The WIIW believed that Turkey's significant economic growth was mainly due to its increased domestic demand. Turkey is the country that witnessing the quickest increase in domestic demand, which has deserved attention of foreign investors.
In addition, Ukraine ensured their advantage of low wage cost through devaluation, while in Slovenia jobs were sacrificed in order to maintain a stable exchange rate. In 2009, Slovenia's unemployment rate increased by 2.5 percent, rising to 12 percent.
According to the projection, the deterioration of Center and Eastern Europe's employment market will reach the heights this year. The three Baltic States and Slovakia will have most serious unemployment.
In addition, the average unemployment rate in the 10 new EU countries will rise from 8.5 percent of 2009 to 10.8 percent of 2010. But in 2011 the unemployment will slow down to 10 percent and in 2012 may further decline to 8.6 percent.
In the area of domestic demand, the situation in Center and Eastern European countries will be improved at some extents. In 2009, only Poland and Turkey in this region had positive growth of private consumption, while in the Baltic States it declined by almost 30 percent in various quarters. Other factors such as credit squeeze and inflation also badly hit the economies of these countries.
The rise of budget deficits in some Center and Eastern European countries was due to the decrease of their tax revenue, which weakened the paying capability of their relevant governments, to some extents suppressed the stimulation to economic recovery and reduced the region's capital flows, said expert of the WIIW Vasily Astrov.
Astrov even believed that it might take 10 years in average for the EU countries to break away from the economic crisis and this will result in slowing down the process of EU enlargement.
Nevertheless, the WIIW forecasted that the 10 new EU countries will have an average economic growth of 1.2 percent this year, 0.3 percent higher than that of 15 old EU countries. The next year, average economic growth of the new EU countries was expected to reach 2.7 percent, 1.1 percent higher than that of the old EU countries.
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