World Bank warns that region faces tough times in coming years.
Europe’s emerging markets should not expect to make a quick recovery this year from the affects of the global financial crisis, the World Bank claims.
Philippe Le Houérou, World Bank vice president for Europe and Central Asia, says that the countries hardest hit hardest by the downturn are likely to be the slowest to resume economic recovery. GDP growth forecasts in the region are some 50% lower than the predictions for some other regions in the developing world.
In 2007, growth in the emerging markets of Europe and Central Asia peaked at some 7%, but fell to a negative 6% last year compared with 1% in the Middle East, 3% in Latin America and about 4% in developing Asia and Africa. In Europe and Central Asia, 20 out of 30 emerging markets experienced a GDP decline last year, including -18% in Latvia.
Le Houérou projects regional growth for 2010 of about 3%. The prospects for 2011-2013, he adds, are only slightly better. “Rising joblessness is pushing households into poverty and making things even harder for those already poor.”
He says that struggling economies should target social spending on the most needy and vulnerable. “Social spending reform, which has been lagging in many countries of the region, is now becoming more urgent.
“Before the crisis, inefficiencies in social spending – which makes up more than half of government expenditures in some countries – may have been affordable for some,” Le Houérou says. “Now it is clear that they are not.”
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