Posted on 28 Jun 2012
The impact of the eurozone debt crisis and the global economic slowdown will cut growth in half in the European Union's developing east, but the region's economies will accelerate again in 2013, the World Bank said yesterday.
The global development bank saw Poland leading growth among the EU's 10 former communist states and member-in-waiting Croatia, with a 2.9% expansion in 2013.
Baltic states Latvia and Lithuania, which are recovering from huge economic downturns that have wiped more than a fifth off of their economies since 2008, will follow with growth of 2.3% apiece.
Most of the other countries in the region were seen growing or stagnant, with the exception of Hungary, Slovenia, and Croatia, which were expected to contract by 0.4% to 1.2%, the World Bank said in a report.
It cited a worse-than-expected slowdown in western Europe, and the shortlived nature of economic policy interventions in late 2011 and early this year that had failed to calm financial markets and weak confidence among consumers and investors.
“In this volatile environment, economic growth in EU11 countries is set to decrease from 2011 levels to 1.5% in 2012, with all EU11 countries growing slower than a year before and three countries slipping into recession,” the World Bank said in a regular economic report.
“However, given the heightened uncertainty, even this projected modest growth assumes that policies will be adopted in the euro-area to successfully avoid a serious deterioration in international financial market conditions.”
The bank urged central banks to maintain accommodative economic policy and for authorities to shore up confidence of financial markets.
It also cautioned governments who have engaged in fiscal consolidation to ensure their efforts did not smother recovery.
“In designing the composition of fiscal consolidation, governments should take into account the fragility of the economic outlook and try to limit the negative impact of fiscal consolidation on growth,” it said.
The bank saw all the new EU members returning to positive growth in 2013, with the entire region growing 2.5%, versus 1.2% for the EU's original 15 western members.
