Finance

Finance

Fitch: Only Azerbaijan’s economy in emerging Europe is projected to grow this year

02 April 2009 11:05 (UTC +04:00)

BakÄ±. Vahab Rzayev â€“ APA-Economics. Emerging Europe will suffer its biggest fall in real gross domestic product since the collapse of communism in the early 1990s, underlining the severity of the trade and financial shocks that have hit the region, Fitch Ratings said in a new report on Wednesday.
GDP growth is likely to contract by 3.1% this year in Emerging Europe, according to the ratings agency. That would be a severe recession after growth of 4% in 2008 and an average of 6.8% in the five years to 2007.
Fitch expects only a modest recovery of 1.4% in 2010, which would be "insufficient to prevent further rises in unemployment and pressure on public finances."
These shocks include the sharpest recession in the world’s developed economies with the Second World War, a reversal of international capital and financial flows, as well as a dramatic decline in commodity prices.
The aggregate forecasts, however, conceal a wide range in growth prospects across the region. As a result, investors should differentiate between countries rather than treat Emerging Europe as a homogenous group, Fitch said.
For example, Azerbaijan’s economy is projected to grow 2.5% this year, while that of Latvia is expected to contract by 12%.
The economies most exposed to the dramatic decline in global trade and financial flows as well as the deleveraging process are Hungary and Kazakhstan, while Poland and Turkey are least exposed, though not immune, to these shocks, Fitch said.
This year’s decline in GDP will be the first since the Russian crisis in 1998, when output fell by 0.5%. It will be the steepest since the drop of 6% in 1994, the agency said.
Out of 21 countries it covers in Emerging Europe, Fitch forecasts GDP to contract in 19 of them, be flat in one and grow in only one. That is a much more widespread recession than in 1998 and 1999 when half the countries continued to grow, the agency said.
Of the largest economies, Fitch expects both Russia and Turkey to shrink by 3% and growth to be zero in Poland.
Aid from the International Monetary Fund and other international institutions will play a crucial role in providing financing and bolstering confidence in several countries, Fitch said.
A number of countries in Emerging Europe have already received financial support from the IMF and other organizations. Among them are Hungary, Latvia, Ukraine, Belarus, Serbia, and Romania.