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The Economist: For Romania and Bulgaria, “the party� is nearly over

Despite the optimistic prediction’s minister Varujan Vosganian, who recently declared that in 2012 the GDP per capita will stand at EUR 10,000, “The Economist” consideres Romania as a leading candidat for a hard landing.

“After a good run, Eastern Europe faces an economic slowdown. (...) The newest (and poorest) members of The European Union (EU), Romania and Bulgaria, their economies have been growing fast at around 7-8% a year. They are now leading candidates for a hard landing. A property bubble in Bulgaria seems to be on the verge of bursting, though this has still to filter through to the rest of the economy. Yet for now, few seem worried. Having dodged sanctions from Brussels (not fully in the case of Bulgaria), politicians in the Balkans seem to think that defying the laws of economic gravity is a cinch”, The Economist notes.

According the newspaper, for a decade or more, Eastern Europe has benefited from exceptional (and mostly unforeseen) good fortune. Economic and political stability, including for ten countries membership of the European Union, has boosted investors’ confidence and cut borrowing costs. (...) Inevitably, it could not last. Wage costs are creeping up. Labour shortages are biting. Out-of-date infrastructure, such as Poland’s notorious roads, is clogging trade. In several countries inflation is rising. And world markets, both for raising capital and for exporting, are looking tougher. In the face of all this, growth this year has been surprisingly strong. That is partly because the euro-area slowdown has only just started; partly because domestic demand has been rising; and partly because intra-east European trade has started to make up for softer exports westwards”, The Economist also notes.

Recession wave in EU economy

In an other report, Bloomberg writes that the EU’s economy has registered a contraction in Q2 of this year for the first time since the introduction of the single currency in 1999, Ziarul Financiarul informs.

‘Compared to Q1, when the GDP had risen by 0.7 per cent, in Q2 the GDP has dropped by 0.2 per cent in the 15 nations that adopted the EUR. Germany’s economy has dropped by 0.5 per cent compared to the level it registered in Q1 of this year, back when it registered a hike of 1.3 per cent, the data issued by the German statistics bureau shows. The economists expected a drop of 0.8 per cent. The drop was mostly caused by the slowdown in the construction market, and by the one registered by the taxpayers’ investments and consumption, the officials of the statistics bureau stated. France’s GDP has also registered a 0.3 per cent drop compared to the level it registered in Q1 of the year, back when it registered a growth of 0.4 per cent, according to the data issued by the French statistics office.

The Italian economy has registered a contraction in the second quarter, with the GDP dropping by 0.2 per cent after it registered a 0.7 per cent growth in the first quarter of the year.

The Central and Eastern European countries face economic problems too. In the second quarter of this year the Czech economy has registered the weakest growth rhythm of the last four years, with the inflation rate lowering the consumption level. Hungary’s economy, still recovering after a period of zero economic growth, has registered a growth rhythm higher than the one forecast for the second quarter of this year, on the backdrop of record crops and of a fiscal relaxation that follows the austerity measures that the Government had previously imposed.

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Tags: economy growth registered economist economic romania bulgaria rsquo euro