Transition economies on upswing, says U.N.

  • 2002-11-21
GENEVA

The economies of Eastern Europe, the Baltic and ex-Soviet states can expect their overall growth rate to accelerate to 4 percent in 2003, U.N. economists said Nov. 14.

For 2002, the transition economies as a whole are likely to be among "the fastest-growing regions in the world," the United Nations Economic Commission for Europe said.

"Aggregate GDP in the transition economies as a whole is expected to increase by some 3.75 percent in 2002 and some 4 percent in 2003," the ECE said in its latest report.

However, in spite of the optimistic 2003 forecasts, the Geneva-based U.N. body in its Economic Survey of Europe added a cautionary note "given the considerable uncertainties."

"In terms of the envisaged rates of GDP growth, some of these forecasts appear to be quite optimistic, so their realization will probably be conditional on a speedy reversal of the current negative trends in the global economy," the report said.

ECE economists described as "increasingly fragile" the global economic situation at the start of the final quarter of 2002.

"The short-term outlook has been clouded by the steep fall in international equity markets and heightened geopolitical risks associated with the prospects of war in Iraq and the related upward pressures on oil prices," Dieter Hesse, the head of the ECE's economic analysis division, told a news conference.

"The recovery for 2002 has now been postponed until the second half of 2003," he added.

In the United States, real growth is forecast to increase by less than 2.5 percent this year and by a slightly improved 2.6 percent in 2003, the ECE report noted.

Growth in the 12-member euro zone is forecast to increase this year by a meager 0.9 percent, picking up in 2003 to about 2 percent, it added.

The UN report predicted the Baltic states were likely to be the "fastest-growing subregion in the short run" among the transition economies.

The Baltic states - Lithuania, Latvia and Estonia - are expected to have an average rate of GDP growth of 5 percent in 2002, improving slightly in 2003.

In the Commonwealth of Independent States, a loose association of 12 former Soviet republics, aggregate GDP is forecast to increase by 4.5 percent in 2002, and slightly less in 2003.

Russia, whose economy slowed markedly at the start of 2002, is set for GDP growth this year of at least 4 percent, the ECE said. Growth in Russia is led mainly by a recovery in domestic demand and the upturn in oil prices.

"If world oil prices remain at their present high levels, the Russian economy is likely to grow even faster next year," the report added.

Turning to Eastern Europe, the average rate of growth, which is heavily influenced by Poland, is expected to be 2.5 percent in 2002, improving to 3.75 percent in 2003.

"In general, growth in the Central European transition economies is likely to be moderate, as these countries are the most affected by economic weakness in Western Europe due to their strong dependence on trade with the latter," the report said.