Growth returns to Central Europe as eurozone exits recession

By Axel  Reiserer

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Central Europe and the Baltics will grow at 0.9 per cent this year before modestly recovering to 1.9 per cent in 2014, the EBRD says in its latest Regional Economic Prospects report published today. Growth in the region picked up in the second quarter of the year, as the eurozone finally showed signs of exiting recession.

After a very weak first half of the year, recent data in Poland point towards a recovery over the coming quarters.

The Slovak Republic similarly saw a revival in industrial production over last quarter, in particular in manufacturing. The government has made progress with its fiscal consolidation drive, though has further to go next year. EBRD projections remain at slightly under one per cent for this year, and about 2 per cent in 2014.

Hungary has seen a welcome cyclical recovery, with a second quarter of growth in Q2 2013. This has brought to an end a “double-dip” recession that had lasted throughout 2012, though the level of economic output is still only back to where it was in early 2009. For 2013 the EBRD expects growth to be marginally positive, and for 2014 to edge up to 1.2 per cent.

The recession in Slovenia deepened in the first half of 2013, and for the year as a whole a GDP contraction of 2.4 per cent is expected. Domestic demand continues to suffer in the context of corporate deleveraging, banking stress and fiscal tightening, Further need for bank recapitalisation remains likely.

The three Baltic economies saw notable growth deceleration this year, though with growth rates of 3 per cent (Lithuania) and 4.2 per cent (Latvia), these two countries will remain growth leaders in Europe. Based on further productivity increases and gains in export market shares all three economies seem well-poised to take advantage of the incipient European recovery. The EBRD expects growth rates between 2.5 and 3.5 per cent for 2014.

The recession that took hold in Croatia in 2009 has persisted into 2013. The economy remains weighed down by long-standing problems of uncompetitive industries, labour market inflexibility and a large and inefficient public sector. However, EU membership should enable the country to benefit from full access to the single market and to substantial EU funds, which should lead to some positive growth in 2014.

Read the full Regional Economic Prospects - November 2013 (892KB - PDF)

Download growth in real GDP data (5KB - CSV)

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