Monday, March 23, 2009

Doomsday reports? - notes on exceptionalism V.

Although I have my doubts regarding economic forecasts - especially in case of longer periods - and in these times it is hardly possible to make a prognosis valid even for a few weeks, today's newsreel contained two interesting pieces. The estimated growth of Germany was cut by many economic institues, while a London based research center published a series of prognosis regarding ECE, painting a dire picture of the regions outlooks. I won't discuss these analysis in detail, neither at this occasion nor later, but in this case it is not unnecessary to point out the most important elements, at least from an East-Central European perspective: Germany's recesion is forecasted in the 4-5% range, and as this country is the foremost export market of ECE countries (for example the correlation etween Hungary's and Germany's growth is extremly tight)and the strengthening of internal demand is not really possible due to the importance of the credit bubble in it's earlier drive, it is very likely that the region as a whole will be affected. Similarly important is the revision of growth estimates for the Czech Republic and Poland for this year. Up to this point these countries - with Slovakia - were considered as positive examples of prudent economic policies making them capable to weather the storm. (The specialist press here, in Hungary even now treats these countries as examples of very tiny positive growth in this year.) The forecasts for Slovakia were modified a couple of weeks ago (it has passed the Hungarian public's attention unobserved) and now the Czech central bank, having even in January a forecast of 2,9% growth changed it's view and now they are counting a -2%. The Londoners published a -3% forecast for Poland as well, a sharp reduction from earlier positive estimates and accompanied in this model with a 5% budget deficit as a ratio of GDP. Even though the perspective outlined for Hungary is worse (-7,5%) the whole picture depicts a catastrophic situation. (-15% and -10% in the Baltics, -5% in Bulgaria, -7,5% in Romania etc.and the revision for Hungary are now very modest compared to the estimates for other countries, not that it is very important.) The processes seem to be very similar and even if some differences will remain the direction is the same: no country will remain unaffected, and every one of them is heading towards a very dire ecnomic situation, regardless of earlier "good" or "bad" behaviour. It is highly feasible that at the end there won't be a defence line left on country level, no means to counterbalance the effects of the crisis.

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