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World Bank: Emerging Europe stuck in ‘debt shadow’ of West

Washington, Oct 13 (Calcutta Tube/DPA) Eastern and Central European countries could face another economic slowdown if their Western neighbours cannot gain control of their finances, the World Bank warned Friday.

Indermit Gill, the World Bank’s chief economist for the region, said that emerging economies in Europe had come out of last year’s economic crisis more dependent than ever on Western Europe.

While those trade links helped the emerging European countries pull out of a deep recession last year, Gill warned that the region could once again suffer weak demand for their exports as Western governments cut spending to bring their public finances in line.

‘The high debt in Western Europe has a shadow that falls on Central and Eastern Europe,’ said Gill.

Growth in emerging European and Central Asian economies will recover to 3.9 percent on average in 2010, the World Bank forecast, after a massive contraction of 5.1 percent in 2009.

But the bank said unemployment remained high in the developing European countries and was still rising in the former Soviet republics.

The region’s recovery was largely the result of rising demand in Western Europe, which takes about three quarters of the region’s exports.

Europe’s developing economies needed to boost domestic demand or rely on the ‘dynamism’ of their Western neighbours if they hope to maintain growth in the longer term, Gill said.

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