World Bank Report: EU10 to Register Tangible Economic Growth in 2011

Business | April 6, 2010, Tuesday // 19:42
Bulgaria: World Bank Report: EU10 to Register Tangible Economic Growth in 2011 Source: World Bank EU10 Economic Report 2009

Bulgaria and Romania are the only EU10 countries where the foreign investments did not drop below 2% of the GDP, according to the EU10 Regular Economic Report of the World Bank.

The Report, which has been released in Warsaw, Poland, says the EU’s newest member countries – the EU10  – are set to return to growth in 2010 and 2011 but growth rates will be lower than the one they had before the financial crisis hit them.

The combined economic growth of the EU10 states is forecast to be 1.6% in 2010, and 3.6% in 2011, after the region registered a 3.6 decline in 2009.

“While the EU10 region is set to outgrow the EU15 region in both 2010 and 2011, the recovery is weak compared with pre-crisis rates, and it will take until the second half of 2011 before real output will regain its pre-crisis level,“ the World Bank says while also pointing out that the EU10 has continued its gradual recovery at the beginning of 2010 in line with the recovery of the EU15.

However, the recovery of the EU10 that can be expected in 2010 is described as “modest”.

According to government projections, Poland, Slovakia, Lithuania, Romania, and the Czech Republic are leading the recovery in 2010, the World Bank points out while stressing that “only in 2011 will all EU10 countries experience growth.“

“While the recovery in the global economy is under way, the outlook for the EU10 region remains uncertain. Unemployment is still rising and is expected to decline only in 2011. In view of the weak recovery, companies are likely to postpone hiring of new workers until growth expectations are firmer, especially since many businesses reduced the average per worker work hours during the crisis.  In addition, some EU10 countries, including Bulgaria, Czech Republic, Romania, and Slovakia, have begun consolidating their governments because of fiscal pressures and a desire to make public administration more efficient,” said Kaspar Richter, Senior Economist in the World Bank’s Europe and Central Asia Region and lead author of the report. 

The unemployment rates in the EU10 rose from 6.5% in June 2008 to 9.5% in January 2010, increasing from 2.9 million to 4.6 million persons. Governments in all EU10 countries, with the exception of Romania, project higher unemployment in 2010 than in 2009.

From June 2008 to January 2010, unemployment rates increased by around 16 percentage points in Latvia, around 10 percent in Estonia and Lithuania; and less than 4 percentage points in Slovakia, the Czech Republic, Hungary, Slovenia, Bulgaria, Poland, and Romania.

“The crisis has re-emphasized the importance of supporting growth through structural change, as envisioned in the EU’s new Europe 2020 strategy for smart, sustainable, and inclusive growth. Boosting potential growth would limit the fiscal deterioration resulting from the crisis, and would help to tackle the tough task of dealing with globalization, energy deficiency, climate change, and population aging.  The reform agenda ranges from increasing labor force participation and strengthening higher education and innovation, to cutting red tape and reducing costs for doing business,” said Thomas Laursen, Country World Bank Country Manager for Poland and the Baltic Countries. 

The World Bank Report says that Bulgaria’s decline of consumer demand has led to a decrease of its exports from 83% of the GDP in 2008 to 58% of the GDP in 2009.

While Bulgaria saw its foreign direct investment drop from 33% of the GDP in 2008 down to 6% of the GDP in 2009, it is still the only country in addition to Romania where they are above the 2% of the GDP level, unlike the other EU10 countries.

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Full Text of the World Bank EU10 2009 Economic Report READ HERE

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Tags: World Bank, report, economic growth, GDP, EU10

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