Eurozone crisis clouds recovery in emerging Europe and Central Asia

"Most countries in Emerging Europe and Central Asia have recovered from the global economic crisis, but growth has returned at lower rates than pre-crisis trends in most of the region. The region is expected to record a real growth rate of 4.3 percent in 2011, which is one of the lowest of any developing region," said Philippe Le Houérou, World Bank Vice President for the Europe and Central Asia Region. "The slow recovery in the region may be establishing a 'new normal' of lower economic growth rates in many of the region's countries."

Le Houérou cautioned, "The sovereign debt problems in Western Europe pose challenges to the sustainability of this relatively tepid recovery. The Eastern Europe and Central Asia region is especially dependent on Western Europe as an export market and a source of finance and migrant remittances, so slower growth in the West will hurt. The region's strong financial linkages to Western Europe, which were a source of growth during the boom years in Central and Eastern Europe, are now a source of vulnerability for some countries."

According to the briefing, most countries in the region have recovered the output losses suffered during the 2008-9 global economic crisis. In fact, GDP remains below its 2007 level in only eight out of 30 ECA countries. Helped by high commodity prices, the countries farther to the east in the region have done much better since the crisis than those to the west.

But ECA's recovery signals a lower growth gradient than the pre-crisis rates. There has been a noticeable reduction in growth prospects: countries in the region may need to prepare for growth rates that are 2 percentage points of GDP less than what they were before the global crisis.

Details also at www.worldbank.org/eca