Nov 19 (Reuters) - The crisis-bitten economies of central
and eastern Europe will mostly see a faster growth next year
than previously expected but the recovery will still be
moderate, the OECD said in its semi-annual outlook on Thursday.
The region's countries will mostly outgrow the euro area,
which the OECD expects to expand by 0.9 percent next year and
1.7 percent in 2011.
The region's growth will follow a recovery of demand in the
main export markets, but higher unemployment and the need of
fiscal consolidation will cap the pace of expansion in the
coming years.
The following are GDP forecasts and key issues facing the
region's economies, according to the OECD's economic outlook.
GDP FORECASTS 2009 2010 2011
OECD members (June forecasts in brackets)
Czech Republic -4.4 (-4.2) 2.0 (1.4) 2.8
Hungary -6.9 (-6.1) -1.0 (-2.2) 3.1
Poland 1.4 (-0.4) 2.5 (0.6) 3.1
Slovakia -5.8 (-5.0) 2.0 (3.1) 4.2
non-OECD countries
Estonia -14.4 (-13.9) -0.8 (-0.7) 3.9
Slovenia -7.9 (-5.8) 2.7 (0.7) 3.0
CZECH REPUBLIC
Stronger investment and export demand will lead to a gradual
recovery in 2010 and 2011, though weak consumption will act as a
drag on growth.
The government responded to the downturn with two stimulus
packages and cyclical factors will further increase the general
government deficit. However, there is little room for further
discretionary fiscal easing.
Approved fiscal consolidation measures will cut the 2010
fiscal gap by about 2 percentage points relative to GDP, but
staining the consolidation over the longer term will require
addressing large unresolved spending issues, particularly in
health care, welfare and pensions as part of the necessary exit
strategy.
HUNGARY
GDP growth in the IMF-supported country should progressively
resume in 2010, and gather pace in 2011, on the back of a
strengthening foreign demand and easing credit conditions.
Scope for further monetary policy easing will be determined
by the credibility of continued fiscal consolidation and
conditions in global financial markets.
To maintain investor confidence, it is crucial that the
government sticks to the newly adopted medium-term fiscal
framework and supports the efforts of the new fiscal council.
Eventually, the shift of tax burden from labour to
consumption will play an important role in boosting Hungary's
growth potential.
POLAND
Activity is projected to pick up, mainly driven by fixed
investment, but to remain well below potential rates for some
time.
The general government deficit is projected to reach levels
that are unprecedented since the beginning of the transition
process, but no fiscal consolidation measures have been announced
for 2010 by the authorities.
The government's privatisation programme, aimed to avoid
breaching the constitutional public debt limit of 60 percent of
GDP, will delay the much needed consolidation of public finances
until 2011.
Public debt is expected to increase significantly, and the
60 percent limit may be violated in 2011 if projected savings of
1 percent of GDP are not implemented by then.
SLOVAKIA
Activity will gradually pick up in 2010 owing to a brighter
outlook for world trade growth and a resumption of inflows of
foreign direct investment.
The strong increase in unemployment is expected to gradually
level off.
The fiscal position will worsen markedly this year and next,
largely due to the cyclical rise in spending on social benefits
and the fall in tax revenues but also to two fiscal stimulus
packages enacted earlier in 2009. In 2010, the rise in the
deficit will be limited by a set of ambitious expenditure cuts.
Over the medium term, further fiscal consolidation will be
necessary to ensure the sustainability of public finances.
ESTONIA
GDP is projected to fall by 14.4 percent this year, to
broadly stabilise in 2010 and to recover in 2011.
Maintaining the currency board with a view to adopting the
euro as soon as possible remains the primary target. The need to
meet the 3 percent of GDP Maastricht criterion implies that
fiscal policy will remain very tight.
SLOVENIA
A mild rebound has been occurring and is expected to
continue through 2010, driven by external demand, before growth
strengthens further in 2011 on the back of stronger investment.
Following the strong 2009 fiscal stimulus, the fiscal stance
is set to tighten in 2010 and 2011 given the need for
consolidation.
A new pension reform should bolster fiscal consolidation
while labour market reforms to increase flexibility should help
speed up employment recovery.
(Compiled by Jan Lopatka; Editing by Andy Bruce)
