No green shoots in Eastern Europe

Discussion in 'Wall St. News' started by makloda, May 15, 2009.


    May 15 (Bloomberg) -- Eastern European economies from Romania to Slovakia shrank in the first quarter as recessions in their western partners slashed demand for exports and crippled foreign investment in the former communist states.

    Five eastern members of the European Union reported contractions today, including a sharper-than-forecast turnaround in Slovakia, which slumped 5.4 percent, according to statistics offices. Romania and Hungary declined an annual 6.4 percent.

    “The recession has started on a very severe note -- there are massive surprises and some are much worse than expected,” said Bartosz Pawlowski, a strategist at BNP Paribas in London. “It doesn’t appear a recovery is coming any time soon.”

    Eastern Europe, which helped fuel European Union growth since enlargement in 2004, is hobbling through a recession and many of the region’s governments are unable to spend their way out because of restrictions tied to loans. The International Monetary Fund has given aid to several countries in the region, in many cases to help them avoid default.

    Economies in Eastern Europe, which grew about 7 percent on average in the five years through 2007, have been hurt by reduced demand for their exports and a drying up of capital inflows. The credit crisis will cause losses of $4.1 trillion by the end of 2010 globally, the IMF predicts.

    Contraction Details

    The economic decline in Slovakia compares with growth of 2.5 percent in the last three months of 2008, and a forecast for a fall of 2 percent in the median estimate of five economists in a Bloomberg survey.

    “This is very bad. It shows that the euro-region’s problems get fully translated into the Slovak economy,” said Maria Valachyova, an economist at Slovenska Sporitelna AS in Bratislava. “The drop is so big that all parts of GDP must have declined, including household consumption.”

    Hungary’s deepening recession -- the fourth consecutive quarterly decline -- came as industrial production dropped an average annual 21.8 percent in the first three months, including a 25.2 percent record plunge in February.

    In Romania, a slowdown in lending, wage growth and government spending helped prompt the decline. On the quarter, GDP shrank 2.6 percent, compared with quarterly growth of 2.9 percent in the last three months of 2008.


    The Czech economy contracted 3.4 percent on an annual basis in the first quarter, the Prague-based statistics office said. The central bank cut the key interest rate to a record low 1.5 percent last week on expectations that the economy will shrink and inflation will slow to the bank’s target this year.

    Bulgaria’s economy contracted for the first time in 11 years in the first quarter, shrinking 3.5 percent compared with 3.5 percent growth in the fourth quarter, the Sofia-based statistics institute said in a statement today.

    The German economy, a major source of exports and investment for eastern Europe, plunged a seasonally adjusted 3.8 percent from the fourth quarter, when it fell 2.2 percent, the Federal Statistics Office in Wiesbaden said today. France’s economy shrank 1.2 percent in the first three months of the year, Paris-based Insee said.

    Regional unemployment is rising, exports are dropping and central banks are cutting interest rates to stimulate growth and offset the effects of dwindling global funds for investment.

    Loan Packages

    In the Czech Republic, Skoda Auto AS, Volkswagen AG’s Czech unit, has said first-quarter after-tax profit fell 91 percent because of slack demand. Romanian carmaker Dacia SA, the country’s main exporter, has cut back production and temporarily laid off employees and Bulgarian chemical fertilizer maker Neochim AD halted production for several months.

    Romania became the latest eastern European nation to contract a loan from the IMF, the EU, the European Bank for Reconstruction and Development, the World Bank and other lenders, receiving 5 billion euros ($6.8 billion) of a 20 billion-euro aid package last month.

    Hungary, Belarus, Serbia, Latvia and Ukraine have also received bailout packages and analysts from Fitch Ratings predicted in an e-mail yesterday that Croatia, Bulgaria and Lithuania will follow.

    Russia’s central bank cut its main interest rate on May 13 for the second time in less than a month, to 12 percent from 12.5 percent, following cuts this month by the European Central Bank, Romania, Norway, Iceland and Indonesia, in an effort to stimulate economic growth.

    The Federal Reserve, Bank of England and Bank of Japan have lowered their key rates to close to zero and are buying government and corporate debt, pumping new money into their economies to prevent the development of a deflationary spiral.

    The ECB, which makes the decisions that have the most immediate impact on eastern European economies, on May 7 cut the benchmark interest rate to a record-low 1 percent and said that’s not necessarily its lowest level.
  2. look into my eyes, look into my eyes, everything is fine, everything is fine, you are going to your bank and you will take a mortgage, you will consume like there is no tomorrow, everyone of us is Jesus Christ, we can save the world, look into my eyes, look into my eyes, no you can't feel that pain into your arse

    1,2,3 you're back
  3. I'm surprised Eastern Europe is suffering this much. The lines of trade they're leading in - human trafficking, prostitution and vodka - were supposed to be recession proof :cool:
  4. well, and in a world of increased taxation, the underworld is the way forward
  5. zdreg


  6. d08


    LOL, you're simply a SOB aren't you.
  7. S2007S


    makloda sounding a little more bearish, hmmmm, quite surprising.
  8. They also led in property bubbles, hence the current pickle. When Bucharest is more expensive than Berlin, you know something is wrong.