EBRD ups 2010 growth forecasts for Middle Europe

The European Bank for Reconstruction and Development (EBRD) has revised upwards its 2010 growth forecasts for the Middle European region, reflecting a faster than expected economic recovery. The EBRD expects positive figures for most countries. But there are differences between the countries. Russia and the Slovak Republic will display strong growth figures, while Bulgaria will lag with only a neutral growth this year.

Continuing recovery
The EBRD forecasts a gradual global recovery during 2010. The global recovery will support regional growth, due to the increase in exports. For the year 2011 the development bank expects a continuing expansion with high growth rates.

                                 2010        2011
Bulgaria                    0,0           2,7
Romania                   1,3            2,3
Russia                      3,9            4,2
Slovak Republic        2,8            3,7

Table: EBRD outlook economic growth
(Note: The EBRD doesn’t publish growth forecasts for the Czech Republic. The Czech Republic graduated from EBRD, thanks to a successful transition)

Beside exports, foreign direct investments will support economic growth. For example, in Romania, Ford invests in the production of new and green models. The car producer received a loan of EUR 400 million from the European Investment bank (EIB). The Slovak Republic is likely to benefit from a rebound in the Eurozone. The country is deeply integrated into Western European manufacturing production. The development of domestic consumption will be also important. The EBRD is positive, but sees risks due to cautious lending policies by banks and expenditure cuts by the government. Furthermore, Russia may benefit from a rebound in prices for commodities and materials.

Positive surprises likely
According to our opinion the outlook of EBRD is in line with the economic reality. However we expect positive surprises, since a lot of institutes, like rating agency Moody’s and local governments, forecast a faster recovery. Moody’s forecasts a growth of 2.3% in Romania and the Russian authorities expect a growth of 5%. We forecast a similar recovery, because the countries come from low levels, due to the recession in 2009. The coming month could be very promising for local financial markets as well for the local businesses.

(site MEI - 25/01/10)