Eastern Europe

Eastern Europe to Decelerate Notably in 2009

The global outlook is rapidly deteriorating as the financial crisis has spread like wildfire through global capital markets, eroding trillions of dollars in market capitalisation. While markets rebounded after governments announced a host of measures to restore confidence, the major advanced economies all seem headed for a recession. Despite a massive US$ 700 billion bailout, the United States is already experiencing a major slump, as downtrodden consumers and difficult financing conditions are weighing heavily on the economy. Against this backdrop, the Bush administration is considering the execution of a second US$ 150 billion fiscal stimulus plan, endorsed by the Federal Reserve. Similarly, Europe is headed for a notable downturn. While European leaders have acted decisively and prepared a bank bailout that exceeds US$ 1 trillion, the measures will only serve to mitigate the slump, as the major EU economies are already in or near a recession. Japan’s financial system currently seems better prepared to withstand the crisis but the economy is nevertheless headed southwards. Japan's businesses are increasingly pessimistic as export prospects wane and consumer sentiment stays near record lows, fuelling concerns that private consumption is unlikely to pick up the slack of faltering exports. Growth prospects for Eastern Europe are also deteriorating and the region is expected to decelerate significantly next year. On a positive note, inflation expectations are improving, as price pressures seem to have reached their peak in several economies in the region.