How The Financial Crisis Is Affecting Eastern Europe
KIEV, Ukraine -- Russian President Dmitry Medvedev said on Friday officials were working too slowly to ease the economic crisis. Russia's $1.7 trillion economy is set to contract this year for the first time in a decade and unemployment is soaring.
Following are some details of how the financial crisis is affecting Russia and some other countries in eastern Europe:
Bulgaria's farming industry, once a main stay of the economy, has shrunk to 5 percent of GDP from 25 percent in the past decade. Cash-strapped producers suffered again in 2008 after the EU froze millions in farm aid over graft. The crisis may erase Bulgaria's gains over the past decade because its main export market, the EU has fallen into recession. Trade unions say some 50,000 people are likely to lose their jobs in 2009.
The economy is highly open and dependent on exports, which in gross terms account for about 70 percent of GDP. The financial system has been relatively unaffected by the initial phase of the global financial crisis, but was hit from a collapse in demand. Over 45,000 people lost their jobs in January, bringing the unemployment rate up 0.8 percentage points to 6.8 percent, the highest level since April 2007.
Hungary, which escaped the crisis by way of a $25.1 billion IMF-led loan in October, planned to cut its budget deficit below 3 percent of GDP and decided on new spending cuts worth 200 billion forints ($835 million) in 2009 to prevent an overshoot. The economy is under pressure from a collapse in demand in the euro zone, its key export market, and the economy is expected to sink into a recession of up to 3.5 percent.
Economic growth slowed to 4.8 percent in 2008 from 6.7 percent in 2007 and analysts expect it to slump to 1.4 percent in 2009.
Decides this month whether it needs to help from the EU or the IMF. The unemployment rate rose to 4.9 percent in January from 4.4 percent the previous month. Several major industrial companies announced job cuts after demand was hit.
Russia's economy is set to contract this year for the first time in a decade. About 300,000 Russians lost their jobs in January as collapsing commodities prices and months of market crisis hammered the real economy. The number of jobless jumped to 6.1 million or 8.1 percent of the workforce versus 7.7 percent the previous month. The government forecast on Tuesday the economy would contract by 2.2 percent in 2009. Growth in retail sales slowed in January to 2.4 percent year on year and a 16.3 percent increase in Jan. 2008.
Serbia expects to conclude a 2 billion euro ($2.52 billion) loan with the IMF by April as growth is seen falling far short of earlier official estimates, Prime Minister Mirko Cvetkovic said on Friday. He said it will most probably grow between 0.5 and 1 percent after the fall in fiscal revenues since the beginning of the year. By contrast, last week Serbia's central bank said the economy was most probably heading into recession. Serbia's economy grew 5.5 percent in 2008.
Slovak industrial output fell by 16.8 percent year-on-year in December, the sharpest fall at least in 10 years. Slovakia expects its export-oriented economy to be hurt by the crisis as demand for its products slows in the West.
Industrial output has shrunk by over a third -- the worst drop in over a decade. Machine building and mineral production both contracted by over half year-on-year. Thousands of workers have been put on unpaid leave as a consequence of the drop. Ukraine's banks have also been hit as its hryvnia currency plummeted, with three banks put in receivership last week, including the seventh largest, the Nadra Bank.
Political turmoil has delayed policy making to combat the crisis and has threatened a $16.4 billion loan from the International Monetary Fund, which failed to agree last week on disbursing a second, much-needed tranche.
Source: Kyiv Post