PRAGUE, Nov 25 (Reuters) - Hungary will slump to a recession
next year but most other central and east European economies
will ride out the global economic crisis with growth in positive
territory, the Organisation for Economic Cooperation and
Development (OECD) said in a report on Tuesday.
The following are OECD's gross domestic product growth
forecasts, main risks and policy tasks for the region:
GDP FORECASTS 2008 2009 2010
OECD members
Czech Republic 4.4 2.5 4.4
Hungary 1.4 -0.5 1.0
Poland 5.4 3.0 3.5
Slovakia 7.3 4.0 5.6
OECD non-members
Estonia -1.9 -2.0 2.9
Slovenia 4.8 2.1 3.5
CZECH REPUBLIC
Growth slowdown will continue as export markets slow.
Rebound will be driven by recovery in both private consumption
and external demand. The main impediment to high growth trend is
shortage of labour and skills. Government should keep cutting
marginal tax rates. More reforms of health and pension systems
needed to secure sustainable fiscal position.
HUNGARY
Activity in the worst crisis-hit central European country
will decline in 2009, before picking up with the world trade and
higher confidence following international financing support.
The most urgent challenge is an improvement in banks' risk
management, mainly regarding households' large foreign currency
exposure. Efforts to restore the sustainability of public
finances should continue to allow lowering the tax and social
security wedges.
POLAND
A structural improvement in the fiscal balance and a
permanent reduction in inflation are key hurdles en route to
meeting the euro entry criteria. A deficit-reduction plan should
aim to contain social spending.
Bringing inflation back to the 2.5 percent target will
probably be the minimum necessary to meet the inflation
criterion for adopting the euro and should remain the key
objective. Tighter monetary policy would have been required in
absence of the global crisis. The OECD projections assume
unchanged interest rates.
SLOVAKIA
Growth will slow down significantly but Slovakia will remain
OECD's fastest-growing member. Fiscal policy should be cautious
upon Jan. 2009 euro entry to avoid the threat of a boom-bust
cycle in a low interest rate environment, although the growth
slowdown will reduce the threat.
Household debt and house prices need to be followed
carefully.
ESTONIA
Real GDP will continue to decline through to the end of
2008. Growth is projected to gradually pick up by the end of
2009 and into 2010, driven by stronger exports.
High inflationary pressures are expected to weaken in 2009,
but the past real exchange rate appreciation will make the
desired export driven recovery challenging.
SLOVENIA
Growth will slow significantly in 2009, driven by a sharp
deceleration in investment in construction. The following year,
economic growth should return toward trend as both investment
and private consumption recover.
With European Central Bank monetary policy likely to remain
accommodating for Slovenia, the fiscal policy stance should
remain at least neutral to avoid adding to inflationary
pressures. Competition in product markets needs to be nurtured.
(Compiled by Jan Lopatka; editing by Tony Austin)
