Economic downturn in Central and Eastern Europe in the light of the forecasts

As a result of the on-going financial crisis the global growth outlook has dramatically worsened. Although for the Central, Eastern and Southeastern European countries including the CIS states no direct results from the financial crisis were initially predicted, it now seems that many of these countries will be affected even more strongly by the global economy downturn than the large industrialised countries. Michael Knogler, Eastern Europe Institute, Regensburg, and Wolfgang Quaisser, Eastern Europe Institute, Regensburg, and Academy for Political Education Tutzing, present corrections to the growth forecasts for Central and Eastern Europe. The individual states and country groups, according to the forecast, will be differently affected by the financial crisis and the effects of the global recession. This takes into account that the economic activity and export demand of individual countries is affected in different ways by capital flows, exchange rates and monetary policy consequences. Also country-specific factors play an important role, including the intensity of domestic and external economic imbalances as well as dependency on raw material prices. In light of the recent IMF forecasts that assume the strongest downturn in the world economy since 1945 and a decline in global economic outlook of 1.3% in 2009, the growth forecasts for Central and Eastern Europe have been greatly revised downwards. The strongest forecast corrections within the CIS were for Russia, Ukraine and Kazakhstan. Within EU the new member states - particularly the Baltic countries but also Slovakia, Bulgaria and Romania - will be faced with a stronger downturn than the old EU members. In addition the crises in Hungary and Latvia have called attention to the economic stability of the ten new EU countries. It remains to be seen whether the growth models of these countries, based on massive foreign capital inflows, can remain intact in the turbulence of the financial crisis.