Emerging Europe On Track For Next Growth Curve

July 30, 2013Emerging Marketsby EW News Desk Team

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The worst is likely over for Europe after a prolonged five-year economic contraction and analysts say emerging markets in Central and Eastern Europe could be on the verge of a new growth curve.

London-based analysts at Capital Economics on Friday told the AFP that "evidence of a possible turnaround is strongest in emerging Europe, and weakest in emerging Asia.”

"From 2015 onwards, we think the region as a whole could grow by 3 – 4 percent a year," said Capital Economics analyst William Jackson, adding that Eastern European economies are “more competitive” than crisis-hit economies in the eurozone’s southern periphery.

Emerging Europe comprises advanced ex-communist countries in the European Union and the eurozone, and also includes Turkey, Russia as well as the less-developed Balkan countries.

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Earlier this month, head of the International Monetary Fund Christine Lagarde praised Eastern Europe for its "courage" in addressing economic crises since 2008, stressing that "the worst is most likely behind" it.

"Five years after the start of the crisis the worst is most likely behind you, most countries have returned to positive growth," Lagarde at a speech Eastern Europe and Romania: The Road Ahead, adding that the IMF expects only two countries in the region to be in recession in 2013 – Croatia and Slovenia – compared to eight in 2012.

Lagarde urged Eastern European countries to continue macroeconomic stability, fairly share the burden of adjustment and spur growth to fully capitalise on progress made since the collapse of communism two decades ago.

She stressed that rigid labour markets, inefficient administration or unfinished transition processes, including the restitution of property, were "roadblocks" that had to be removed if the region were to "break down the barriers to more dynamic growth."

"What has happened in this part of the world is setting standards about what can be done in other parts of the world" in terms of transition to a market economy, Lagarde said.

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According to Jackson, Emerging Europe’s transition into a free market economy means its potential for growth is high. "Low public debt, its position as a manufacturing hub closely integrated with Western Europe, and low incomes ... mean it has plenty of scope for 'catch-up' growth," he said.