Study warns of slower growth in candidate countries

A new report by the Vienna Institute for International Economic Studies (WIIW) warns of slower growth and a decline in industrial production in the transition countries.

Given the external conditions, the overall growth in transition countries in 2002 will be weaker than in 2001, states the WIIW. Acceleration in 2003 is possible provided the business climate in the EU improves. The average rate of catching-up vis-à-vis the EU will stay at about 2 percentage points per year.

Capital formation in the transition economies of Central and Eastern Europe has also weakened or contracted, which does not augur well for economic growth in the medium-term future, warns the WIIW.

The report gives an overview of 12 Central and Eastern European countries: Bulgaria, Croatia, the Czech Republic, Hungary, Macedonia, Poland, Romania, Russia, Slovakia, Slovenia, Ukraine and Yugoslavia (Serbia and Montenegro).

According to the report, expanding consumption has been the major growth factor. The contribution of foreign trade to GDP growth seems largely neutral.

The report finds that the current account deficits in the advanced transition countries will remain relatively low and will continue to be financed largely by inflows of foreign direct investment.

The WIIW also warns of high or very high unemployment in the transition economies. It states that unemployment is unlikely to go down significantly even in the medium term. However, the associated social problems will probably have no destabilizing political consequences, with the exception of Poland, states the study.

 

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