EBRD: modest growth in Eastern Europe

  • 2003-04-24

Economic growth in the former communist countries, which was stronger than the world average in 2002, would increase modestly this year, the European Bank for Reconstruction and Development said in a study released on April 22.

Eastern European countries saw growth of an average 3 percent in 2002, when global economic growth was only 1.7 percent, the EBRD said in its study of East European economies in transition.

"A strengthening in domestic demand in most countries of the region, supported in some countries by significant fiscal expansion and large budget deficits, offset much of the decline in external demand arising from the global slowdown," the EBRD's chief economist, Willem Buiter, said in the report.

"With an expected pick-up in industrialized country activity, 2003 should see a modest increase in growth in the region," he added.

However, the study, which is updated twice a year, said that although the outlook for the global economy was marked by uncertainty, the most optimistic scenario for the region sees a growth rate of 4 percent on average this year.

The most developed countries in the Baltics and Central Europe would see firm domestic demand and would probably benefit from a pick-up in exports to the European Union in the second half of the year.

But the least developed countries of southeastern Europe would also see improved domestic demand this year, the study predicted.

A slowdown in energy-dependent Russia would in turn hurt the economies of other CIS countries, which remain highly dependent on their much larger neighbor, stated the report.