Weathering the Global Storm, yet Rising Costs and Labour Shortages May Dampen Domestic Growth
AbstractThe Vienna Institute for International Economic Studies (wiiw) has just released an analysis of current economic developments in Central, East and Southeast Europe, Kazakhstan, Russia, Ukraine and China (including brief country reports), as well as a medium-term forecast for these countries in the period 2008 2010. A special section investigates labour market developments and the vulnerability of financial markets in individual countries. The majority of the new EU member states (NMS) have been enjoying a period of robust economic growth. The current turbulence on global financial markets is not going to hurt directly or seriously. Even the possible indirect effects should not be too severe. GDP growth is projected to slow down from about 6% in 2007 to some 5% per year over the period 2008 2010. Inflation will gradually decline, yet in most NMS it will stay above that of the eurozone. Economic growth will be mainly driven by rising consumption (supported by rising labour incomes) and by investments. The latter will be bolstered by much higher transfers from the EU budget. Except for Bulgaria, Romania and the Baltic States, all of which remain vulnerable to external shocks, current account deficits will not be excessively high. In sum, the NMS are expected to remain a region displaying dynamic growth in the years to come, maintaining their competitive advantages as attractive locations for both trading and investment purposes. The situation on the labour market has improved dramatically, unemployment has declined rapidly. The economic growth is no longer 'jobless'. On the contrary, most countries in the region are now reporting labour shortages - especially of skilled workers - which could well become a serious constraint on economic growth. After a slight dip in growth in 2008, wiiw expects the Southeast European region to enjoy faster GDP growth in 2009 and 2010 of up to 6%. Remittances and a credit boom will continue to fuel the core growth driver domestic demand. Strong investment growth and incipient re industrialization go hand in hand with an increase in employment. Stable competitive performance (except for Serbia and Turkey) will also provide a better environment for stronger export growth. Nevertheless, the net export position is still unfavourable for want of FDI and technology transfer. The slowdown in global growth, the hikes in oil, metal and food prices on world markets, as well as the subprime crisis are expected to have only a minor impact on the region. However, Serbia's unbalanced growth path in the wake of the Kosovo crisis poses a regional risk. Prospects of EU accession have improved for all countries, except Turkey. Kazakhstan, Russia and Ukraine are all expected to grow by more than 6% per year in the period 2008 2010 - also slightly slower than in the previous two years. A modest cooling down of growth is projected for China as well. This forecast starts a new series with the title ¿Current Analyses and Forecasts¿. It contains an appendix with selected indicators of competitiveness.
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Bibliographic InfoPaper provided by The Vienna Institute for International Economic Studies, wiiw in its series wiiw Forecast Reports with number 1.
Length: 151 pages including 51 Tables and 20 Figures
Date of creation: Feb 2008
Date of revision:
Publication status: Published as wiiw Current Analyses and Forecasts
Central and East European new EU member states; Southeast Europe; Balkans; former Soviet Union; China; Turkey; GDP; industry; productivity; labour market; foreign trade; exchange rates; inflation; fiscal deficits; EU integration;
Find related papers by JEL classification:
- O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
- P24 - Economic Systems - - Socialist Systems and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation
- P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects
- P33 - Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid
- P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-03-08 (All new papers)
- NEP-EEC-2008-03-08 (European Economics)
- NEP-TRA-2008-03-08 (Transition Economics)
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- Peter Havlik & Wlodzimierz Kalicki & L. Randall Wray, 2008. "Monthly Report No. 5/2008," wiiw Monthly Reports 2008-05, The Vienna Institute for International Economic Studies, wiiw.
- Leon Podkaminer & Sandor Richter & Marton Szabó, 2008. "Monthly Report No. 7/2008," wiiw Monthly Reports 2008-07, The Vienna Institute for International Economic Studies, wiiw.
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- C. Goodhart & D. Lee, 2013. "Adjustment Mechanisms in a Currency Area," Open Economies Review, Springer, vol. 24(4), pages 627-656, September.
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