DUSHANBE, June 10, 2009, Asia-Plus — According to a new UN report “The economic situation in 2008-2009 in the Economic Commission for Europe region: Europe, North America and the Commonwealth of Independent States,” in 2008, the Economic Commission for Europe region entered into what has been forecasted to be the worst economic downturn since the second world war. Each of the subregions covered by the Commission is either experiencing or expecting to experience negative growth in 2009, the UN News Center reported on June 9.
The decline in growth has been accompanied by rising unemployment and by especially large declines in international trade and capital flows.
In 2009, growth is expected to be minus 5.1 percent in the Commonwealth of Independent States (CIS), minus 4.6 percent in South-East Europe, minus 4.2 percent in the Eurozone, minus 2.7 percent in North America, and minus 2.4 percent in the States that are members of the European Union. The economic downturn has been quite severe in the Baltic economies, Iceland and Ireland, where growth is forecast to be close to minus 10 percent, and somewhat severe in Germany, the Russian Federation and Ukraine.
In the meantime, a few of the smaller economies in the region covered by the Commission, such as Albania, Azerbaijan, Cyprus, Tajikistan, Turkmenistan and Uzbekistan, may have positive growth in 2009, which may be relatively solid in the latter two economies. Although a slow recovery is expected to take place in 2010, with positive but slow growth throughout most of the region, there is considerable uncertainty surrounding this forecast and there is a reasonable possibility that growth could still be negative in the European Union.
Unemployment rates in the United States, Europe, Turkey and the CIS are likely to reach double digits by 2010; in some European economies the situation is much worse. For example by 2010 unemployment may reach 20 per cent in Spain and 17 per cent in Ireland. Labor layoffs seemed to occur much earlier in this economic downturn than in earlier ones.
In the advanced economies, the crisis has moderated inflation, which had begun to increase above target levels in early 2008. Although the advanced economies may experience a short period of deflation during 2009, this is unlikely to persist because of its origin in unrepeated declines in world commodity prices. For emerging Europe, however, the crisis, because it has led to significant currency depreciation, has in some cases increased inflation. Thus, for example, average consumer prices were 14 percent higher in the CIS countries in January 2009 than a year earlier, and inflation may be over 5 percent in most of South-East Europe in 2009. The fall in world commodity prices resulted in large declines in the export earnings of the Russian Federation and the energy abundant CIS countries in Central Asia.
The decline in economic growth in the CIS, including the Russian Federation, during the current crisis has been extraordinary, and represents probably the greatest “reversal of fortune” of any of the world’s major regions. Real GDP in the CIS is expected to fall from 8.6 percent in 2007 to minus 5.2 percent in 2009; a turnaround of almost 14 percentage points, which is over twice the turnaround in the United States or the Eurozone over the same period.
