Sun, Sep 21, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

SEB’s Eastern European outlook: Economic recovery but weak domestic demand

Wednesday, March 24, 2010
Opalesque Industry Update - Even Eastern Europe, the region that was hardest hit by the global credit crisis and recession, due largely to its high proportion of foreign currency loans, is now beginning a gradual economic upturn. So far, this turnaround is mainly visible in higher exports and industrial production. In some countries the upswing has been stronger than in Western Europe, but it is occurring from a low level after earlier major declines, writes SEB in its March 2010 issue of Eastern European Outlook.

During the coming year, the recovery will continue to be driven by higher exports.

"Eastern Europe's exports appear to be competitive, despite earlier price pressures in the three Baltic countries and currency appreciation during the past year in several other countries. Russia and Ukraine are also benefiting from high, though stabilising, commodity prices. Domestic demand in Eastern Europe will recover slowly, however; a number of factors, including necessary fiscal tightening, will impede the recovery process," says Mikael Johansson of SEB Economic Research, Chief Editor of Eastern European Outlook.

Consumption and investments will be hampered for another while by rising unemployment, weak wage and salary growth, fiscal tightening measures and low capacity utilisation. Credit conditions are slowly thawing; in Poland the first positive signs of this are now discernible.

During 2010-2011, we do not expect the six countries on which Eastern European Outlook focuses to resume their earlier (excessively) high growth rates, but to barely return to their trend rate. The Polish economy − which is in the best shape − will nevertheless achieve its potential growth in 2011.

• Russia will rebound from deep recession to annual growth of 5 per cent per year.

• In Poland, the only EU country that showed positive GDP growth in 2009, the expansion rate will accelerate to 3.5 and 4.5 per cent, respectively.

• Ukraine's growth will be a modest 3.5 and 4.5 per cent, respectively, after last year's 15 per cent slide.

• Estonia's GDP will increase by 2 and 5 per cent, respectively, after a 14 per cent slide in 2009.

• Lithuania, following its 15 per cent GDP decline last year, will resume growth of 1 and 4 per cent this year and next, respectively.

• Latvia will lag somewhat behind, with recession continuing this year and GDP falling by 2.8 per cent. In 2011 the economy will recover to positive growth of 4 per cent.

In the past year, financial markets have regained confidence in the region, a trend that rests on a fairly stable foundation.

"Many Eastern European countries are moving towards regaining control of their previous severe imbalances, and their need for public sector debt adjustment is less than in many Western countries. Political conflicts, especially related to austerity policies, may nonetheless generate certain market concerns, especially since some of these countries will hold, or have held, elections in 2010-2011," says Daniel Bergvall of SEB Economic Research.

In the Baltics, Eastern European Outlook 's main scenario is still that the currency pegs to the euro will survive. Estonia is expected to meet all Maastricht criteria during this spring's official evaluation, making it highly probable that the country can adopt the euro in January 2011.

Watch the film clip at SEB Newsroom where Mikael Johansson tells more about Eastern European Outlook: Economic recovery but weak domestic demand.

Full Report to be picked up at SEB Newsroom.

SEB is a North European financial group serving some 400,000 corporate customers and institutions and five million private individuals. SEB offers universal banking services in Sweden, Germany and the Baltic countries - Estonia, Latvia and Lithuania. It also has local presence in the other Nordic countries, Ukraine and Russia and a global presence through its international network in major financial centres. On 31 December 2009, the Group's total assets amounted to SEK 2,308bn (~EUR 225bn) while its assets under management totalled SEK 1,356bn (~EUR 132bn). The Group has about 20,000 employees. www.sebgroup.com.


Bg

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. SEC charges 19 investment firms and one trader for breach of Rule 105[more]

    Benedicte Gravrand, Opalesque Geneva: The Securities and Exchange Commission (SEC) started a push to enhance the enforcement of Rule 105 of Regulation M last year to uncover hedge funds and private equity firms that have illegally participated in an offering of a stock after short selling it duri

  2. Fund managers, bullish on Europe, anticipate monetary policy separation of Fed and ECB[more]

    Komfie Manalo, Opalesque Asia: At least 202 fund managers with $556bn of assets under management said that while the European Central Bank (ECB) has eased its monetary policy that sent sentiments towards Europe to pick up, the Fed is expected to hike its rate in the spring of 2015. Investor

  3. Institutions - North Carolina workers call on state pension to dump up to $6bn in hedge funds, UK pension fund criticizes hedge fund fees[more]

    North Carolina workers call on state pension to dump up to $6bn in hedge funds From Forbes.com: The State Employees Association of North Carolina this afternoon called on state Treasurer Janet Cowell to withdraw all investments in hedge funds, which appear to amount to approximately $6 b

  4. News Briefs - Limited partners of investment managers may be subject to self-employment taxes, Just one week left until NYC's Rocktoberfest[more]

    Limited partners of investment managers may be subject to self-employment taxes On September 5, 2014, the Internal Revenue Service (“IRS”) issued Chief Counsel Advice 201436049, concluding that members of an investment manager were subject to self-employment taxes with respect to their e

  5. Institutions - Adviser's faith in hedge funds unshaken by CalPERS' move Advisers weigh in on CalPERS’ decision, Gina Raimondo sees no reason to follow California’s lead, exit hedge funds, Danish pension funds step up 'alternative investments'[more]

    Adviser's faith in hedge funds unshaken by CalPERS' move From WSJ.com: Financial advisers who use hedge funds in their clients' portfolios say they aren't rethinking that approach after a huge California pension fund announced plans to exit the hedge-fund market. The decision by the Cali