Divergence Of Growth Prospects  

The last few years have seen Eastern Europe prosper, with the region experiencing robust economic growth. The collapse of the former Soviet Union crippled many of the economies in the region, and for a long time they languished in the shadow of communism. For many, it took until the turn of the millennium to find the road to economic prosperity. 

Since then, the gains have been significant with most registering consistent, strong growth and some advancing enough to gain EU membership. Romania and Bulgaria became the newest members of the EU in 2007. The region has experienced growth strong enough to place it among the fastest expanding areas in the world in recent years. Growth in the region has substantially outpaced Western Europe for a number of years. 

Azerbaijan has been the leader of the region in terms of growth, often ranking as the world's fastest expanding economy. Even in light of global events in 2008, its economy still maintained impressive growth in excess of ten per cent. In line with the rest of the region, a significant slowdown will take place in 2009 before recovering oil prices spur growth once again. Many countries in the region have been experiencing record levels of growth in recent years, although some have been growing from a low base. However, the global developments that began with the U.S sub-prime crisis in late 2008, have brought a dramatic halt to this progress. 

In fact, many agree that a new dawn has arrived in Eastern Europe and that the heady economic miracle witnessed in recent years is unlikely ever to return. The president of the European Development Bank (EBRD), Thomas Mirow has said that it would be unrealistic to expect a repeat of the double digit growth, record levels of investment and readily available finance experienced in recent years. 

Fitch's Ratings forecasts that the region will experience its biggest fall in real GDP since the fall of the Communist-planned economic system in the 1990s. This dramatic fall will reflect the severity of the trade and financial shocks that have rocked the region. The economy of the region is expected to contract by 3.1 per cent, evidence of a severe and abrupt recession following growth of four per cent in 2008. 

As the countries in the region have either achieved or have strived for EU accession, the region became a more attractive destination for investors. In order to gain membership, many have eliminated trade barriers and funds have been made available for major infrastructure projects. 

As a result, vast numbers of companies have moved their businesses east, creating jobs and reducing unemployment. However, many in the region have had their sovereign ratings downgraded since August 2008 and most are now on negative outlooks. The majority of the region will be affected by deleveraging and will see a sharp slowdown or reversal in private capital inflows and credit growth. In some, difficulties will be compounded by a drop in asset prices and the presence of foreign currency debt on the balance sheets. 

It is important to consider the divergence of growth prospects this year. Azerbaijan is still expected to have post growth at the positive end of the scale, whereas in contrast, Latvia's economy could contract by as much as 12 per cent. Aggregate forecasts conceal a wide range of growth prospects across the region.  

Azerbaijan Has Been The Leader Of The Region In Terms Of Growth, Often Ranking As The World's Fastest Expanding Economy.