Hot prospects for Eastern Europe, despite global cool-down

The giant zone of post-socialist economies that spans eastern Europe, central Asia and Russia is poised to outperform western Europe’s economy in 2001 for the first time since Soviet collapse a decade ago, according to a forecast by the EBRD.

The European Bank for Reconstruction and Development, an institution with €12.2 billion invested in the region, offered this assessment in its annual report on “transition economies” Tuesday.

The bank’s forecasted economic growth rate for the region this year is 4.4 per cent – against western Europe’s 2.9 per cent.

This is a dramatic turnaround from just three years ago, when the region suffered badly from a crisis sparked by Russian rouble devaluation.

But the EBRD credited the region’s governments with keeping up a strong pace of reform, sufficient to fuel economic growth this year even as many western countries including the United States and Germany wrestle risks of recession.

Continued growth may be a trickier proposition in 2002, though, when falling oil prices and prolonged Western economic weakness could drag the region down.

The bank also warned the European Union against drawing a “lace curtain” across the continent, protecting its economy and the economies of its future member-states from eastern competition.

Strong performers

Russia and Azerbaijan – once slow-pokes in transition – were singled out for particular praise.

Russia kicked off judicial reforms this year, seen as a crucial step if the country is to establish the consistent “rule of law” that investors crave. The government of President Vladimir Putin, buoyed by strong oil profits, also moved to start deregulating some industries while newly regulating natural monopolies such as Russia’s massive energy and gas utilities.

Azerbaijan, for its part, re-launched its privatisation programme for medium-sized and large enterprises this year. The Baku-based government also committed itself to liberalised trade and foreign exchange regimes.

There was unprecedented praise for Yugoslavia, where reforms have begun in earnest since the fall of Slobodan Milosevic’s government.

Overall, the EBRD gave Hungary highest marks for both economic liberalisation and democratic development – with Poland, the Czech Republic and the Baltic state of Estonia trailing very shortly behind.

Of the 27 countries surveyed in the bank’s report, only Turkmenistan, Afghanistan’s western neighbour and a dictatorship under President Saparmurat Niyazov, was reported to be moving against the trend of economic liberalisation.