SOUTHEAST EUROPE 2010: A partly splendored thing - by Nicolas Watson

The consensus is that emerging Europe will recover in 2010, albeit at a slower pace than certainly other emerging markets, but also perhaps even more so than the US and Western Europe. However, this view encapsulates what has become a growing problem in looking at the region since the crisis exposed its many vulnerabilities - that it's now simply too diverse to regard as a single entity.

In its top 10 economic predictions for 2010, the consultancy IHS Global Insight says growth in all the emerging regions will recover in 2010 and, with the possible exception of emerging Europe, will outpace the US, Europe and Japan. "Non-Japan Asia will be at the forefront, with GDP growth of 7.1%. Latin America, the Middle East, and Africa will see gains in the 3-4% range. The laggard will be emerging Europe, which will expand only 1.7%." The CEE region's generally high dependency on foreign credit made the effects of the global economic crisis, when it eventually arrived, that much worse. The forecasted decline in GDP for the ex-communist region as a whole – including the former Soviet Union – is more than 6% for this year, compared with 4% for the Eurozone. However, the European Bank for Reconstruction and Development (EBRD) notes that this regional average hides a multitude of variations.

Neil Shearing, emerging markets economist at Capital Economics, agrees with IHS' overall contention that Asia is best placed to prosper, followed by Latin America and Brazil in particular, with CEE continuing to lag behind. He also notes there will be some bright spots in emerging Europe, generally speaking those economies that have received a competitive boost from weaker exchange rates and have comparatively low levels of foreign currency debt.

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