The World Bank July 2010 Report
The EU10 region has returned to growth in 2010 for the first time since the start of the global financial crisis in late 2008. But volatile financial markets, fiscal pressures, and high unemployment cast a shadow on future prospects. Bolstering financial sector stability, shoring up fiscal sustainability, and tackling structural unemployment are essential for safeguarding the recovery.
The EU10 region‘s growth in the first quarter of 2010 was helped by the upturn in global trade, a low interest rate environment, EU funds and restocking. Industrial production, retail sales and economic sentiment indicate a continued recovery in the second quarter of 2010. Low current account deficits and moderate inflation bolster economic stability. Nevertheless, the economic upturn is weak. It will take until the second half of next year before real output in the EU10 region regains its pre-crisis level. Private consumption and private investment are likely to add to growth only from 2011 onwards. And post-crisis growth is likely to stay below pre-crisis growth in view of reduced capital flows, restrained credit growth, and structural adjustments in the economy.
The pace of the recovery also differs widely across the region. Growth in the Slovak Republic and the Czech Republic is supported by the strong rebound in global trade. The robust expansion in Poland remains on track due to stable domestic demand, a competitive exchange rate and EU funds. After seeing the largest contraction of a country of the euro area in 2009, Slovenia is set for moderate rebound due to the rise in external demand, restocking, and continued policy support. Economic activity in Bulgaria, Estonia, Hungary, Lithuania and Romania is set to stagnate, as the unwinding of imbalances continues. The contraction is likely to remain sizable in Latvia in spite of a sharp improvement in growth performance compared to last year.
