Eastern European Outlook: Economic recovery but...

Even Eastern Europe, the region that was hardest hit by the global credit crisis
and recession, due largely to its high proportion of foreign currency loans, is
now beginning a gradual economic upturn. So far, this turnaround is mainly
visible in higher exports and industrial production. In some countries the
upswing has been stronger than in Western Europe, but it is occurring from a low
level after earlier major declines, writes SEB in its March 2010 issue ofEastern
European Outlook.

During the coming year, the recovery will continue to be driven by higher
exports.

"Eastern Europe's exports appear to be competitive, despite earlier price
pressures in the three Baltic countries and currency appreciation during the
past year in several other countries. Russia and Ukraine are also benefiting
from high, though stabilising, commodity prices. Domestic demand in Eastern
Europe will recover slowly, however; a number of factors, including necessary
fiscal tightening, will impede the recovery process," saysMikael Johansson of
SEB Economic Research, Chief Editor of Eastern European Outlook.

Consumption and investments will be hampered for another while by rising
unemployment, weak wage and salary growth, fiscal tightening measures and low
capacity utilisation. Credit conditions are slowly thawing; in Poland the first
positive signs of this are now discernible.

During 2010-2011, we do not expect the six countries on whichEastern European
Outlook focuses to resume their earlier (excessively) high growth rates, but to
barely return to their trend rate. The Polish economy − which is in the best
shape − will nevertheless achieve its potential growth in 2011.


  * Russia will rebound from deep recession to annual growth of 5 per cent per
    year.

  * In Poland, the only EU country that showed positive GDP growth in 2009, the
    expansion rate will accelerate to 3.5 and 4.5 per cent, respectively.

  * Ukraine's growth will be a modest 3.5 and 4.5 per cent, respectively, after
    last year's 15 per cent slide.

  * Estonia's GDP will increase by 2 and 5 per cent, respectively, after a 14
    per cent slide in 2009.

  * Lithuania, following its 15 per cent GDP decline last year, will resume
    growth of 1 and 4 per cent this year and next, respectively.

  * Latvia will lag somewhat behind, with recession continuing this year and GDP
    falling by 2.8 per cent. In 2011 the economy will recover to positive growth
    of 4 per cent.



In the past year, financial markets have regained confidence in the region, a
trend that rests on a fairly stable foundation.

"Many Eastern European countries are moving towards regaining control of their
previous severe imbalances, and their need for public sector debt adjustment is
less than in many Western countries. Political conflicts, especially related to
austerity policies, may nonetheless generate certain market concerns, especially
since some of these countries will hold, or have held, elections in 2010-2011,"
saysDaniel Bergvall of SEB Economic Research.

In the Baltics,Eastern European Outlook's main scenario is still that the
currency pegs to the euro will survive. Estonia is expected to meet all
Maastricht criteria during this spring's official evaluation, making it highly
probable that the country can adopt the euro in January 2011.

Watch the film clip atSEB Newsroom  <

http://newsroom.sebgroup.com/>where Mikael
Johansson tells more about Eastern European Outlook:  Economic recovery but weak
domestic demand.

Full Report to be picked up atSEB Newsroom <

http://newsroom.sebgroup.com/>.

SEB is a North European financial group serving some 400,000 corporate customers
and institutions and five million private individuals. SEB offers universal
banking services in Sweden, Germany and the Baltic countries - Estonia, Latvia
and Lithuania. It also has local presence in the other Nordic countries, Ukraine
and Russia and a global presence through its international network in major
financial centres. On 31 December 2009, the Group's total assets amounted to SEK
2,308bn(~EUR 225bn) while its assets under management totalled SEK 1,356bn (~EUR
132bn). The Group has about 20,000 employees. Read more about SEB at
www.sebgroup.com <

http://www.sebgroup.com/>.

_____________________________________________
For further information, please contact:

Mikael Johansson, Chief Editor, Eastern European Outlook, SEB, Economic
Research, tel.[phone], mob. [phone].
Daniel Bergvall, SEB Economic Research, tel. [phone], mob. +46
73 523 52 87.
Elisabeth Lennhede, Press & PR, +46 70 763 99 16, [e-mail]
<mailto:[e-mail]>



[HUG#1397023]





    Press Release (PDF): 

http://hugin.info/1208/R/1397023/353116.pdf
    EEOMarch2010: 

http://hugin.info/1208/R/1397023/353117.pdf