Uneven recovery continues

RIGA - The EU’s 10 former communist member states are bouncing back from a biting economic crisis with Estonian and Lithuanian economies to grow an expected two percent this year, the World Bank said in a statement, reports AFP. The region’s recovery still hinges on its major Western countries.

“The upswing is taking root across the region,” the World Bank said in a regular EU10 report, noting that the 10 economies were each set to get back into positive territory next year. After contracting 3.5 percent in 2009, the ten economies together should expand 1.8 percent this year and 3.2 percent in 2011, it said.
The recovery so far has been driven by Poland, the World Bank noted. Poland was the only member of the 27-nation European Union to achieve economic growth in 2009, gaining 1.7 percent. The other growth-driver is Slovakia, which relies heavily on car and electronics production for export, recovering strongly after its economy shrank 4.7 percent last year.

Estonia and Lithuania - whose ‘Tiger economy’ label now seems a distant memory after double-digit contractions and stinging austerity measures - should expand by around two percent this year and top three percent in 2011.
Growth in the Czech Republic, Bulgaria, Hungary, and Slovenia is likely to be more modest, ranging from zero to 2.0 percent this year, and hover around 2.5 percent in 2011.

Only Latvia and Romania are projected to contract in 2010, by 0.4 percent and 1.9 percent, respectively, reflecting the depth of their crises after unsustainable credit-fueled spending booms burst.
Latvia’s economy shrank 18 percent in 2009, the steepest plunge in the EU. Over 2008 and 2009 combined, it shrunk by almost 25 percent - the deepest recession in the world according to International Monetary Fund research.
In 2011, Latvia can expect 3.3 percent growth, and Romania 1.5 percent, the World Bank said.

“Prospects for exports, credit and jobs in the EU10 depend foremost on a strong recovery in the EU15,” it noted, referring to the bloc’s Western members. “The EU15’s recovery from the global financial crisis could be sluggish and may still be followed by a relapse,” it warned. “Renewed financial sector stress could spread quickly to the EU10 countries through cross-border linkages.”

Eight of the ex-communist 10 joined the EU in its ‘big-bang’ 2004 expansion - when Malta and Cyprus also entered the bloc. Romania and Bulgaria became members in 2007, taking the full membership to 27.