High-flying, hard-landing

After twenty years, countries from the region still need reform

Publikacja: 10.09.2009 01:56

FINANCIAL CREDIBILITY BY COUNTRIES

FINANCIAL CREDIBILITY BY COUNTRIES

Foto: Rzeczpospolita

„Countries from Central and Eastern Europe should significantly cut the bureaucratic burdens and consequently reform their public finances because in their cases classic methods of counteracting the crisis such as financial programmes stimulating the economy or lowering taxes do not work,” thinks professor Witold Orłowski, chief economist at PricewaterhouseCoopers. He is co-author of a report on transformation in the region entitled 'Hard landing', which the consulting company presented at the Forum in Krynica. It describes the present economic situation in 15 countries in the region and the reasons why growth has been halted there.

According to the report Poland, the Czech Republic, Russia, Slovakia and Slovenia are the pillars of the region and they are dealing best with the economic crisis. „We were lucky that we did not have enough time to make many mistakes, the crisis came to Poland before Poles became excessively indebted,” added professor Orłowski.

„In the years before the crisis, a new generation grew up, a generation which „did not know how to be afraid”, did not have proper modesty and distance from the reality,” added Jan Krzysztof Bielecki, former Prime Minister and CEO of the bank Pekao S.A. He also pointed out that while assessing the condition of our economy and public finances we sometimes use „dogmatic assumptions”. The flagship example is the constitutional provisions regarding safety programs referring to public debt. And Ryszard Petru, economist from BRE Bank, the third speaker who talked about the economic situation of the countries in the region, added that „In case of Poland, it is also important that the government did not make many mistakes.”

[ramka][srodtytul]Strong and weak sides of particular economies[/srodtytul]

Poland

+ attractive for investors

+ large market

+ low level of government and business debt

+ member of the European Union

– high taxes

– conditions for doing business

– risk of destabilization of public finances

Czech Republic

+ competitive industry

+ attractive for investors and financially credible

+ low level of government and business debt

+ member of the European Union

– high taxes

– limited internal market

– dependency on exports

Slovakia

+ competitive industry

+ attractive for investors and financially credible

+ moderate level of government and business debt

+ member of the European Union

– dependency on one sector and exports

– small market

Slovenia

+ good financial credibility

+ member of the European Union

– dependency on exports

– small market

– high taxes

Hungary

+ modern industry

+ advanced restructuring processes

+ member of the European Union

– risk of serious weakening of the currency

– situation of public finances

– government and business debt

– limited internal market

– dependency on exports

Estonia

+ conditions for doing business

+ advanced restructuring processes

+ member of the European Union

– small market

– exposed to currency risk

– debt of private entities

Lithuania

+ good conditions for doing business

+ member of the European Union

– small market

– exposed to currency risk

– difficult financial situation

Łativia

+ good conditions for doing business

+ member of the European Union

– exposed to currency risk

– small market

– risk of serious weakening of the currency

– difficult situation of public finances

Bulgaria

+ attractive to investors

+ member of the European Union

– exposed to currency risk

– small market

– dependency on external financing

Romania

+ attractive to investors

+ member of the European Union

– exposed to currency risk

– dependency on external financing

Croatia

+ attractive to investors

+ prospects for joining the EU

– small market

– dependency on external financing

– dependency on tourist services

– costs of servicing foreign

debt

Serbia

+ potentially attractive to investors

– small market

– dependency on external financing

– no clear prospects for joining the EU

– inadequate economic transformation[/ramka]

„Countries from Central and Eastern Europe should significantly cut the bureaucratic burdens and consequently reform their public finances because in their cases classic methods of counteracting the crisis such as financial programmes stimulating the economy or lowering taxes do not work,” thinks professor Witold Orłowski, chief economist at PricewaterhouseCoopers. He is co-author of a report on transformation in the region entitled 'Hard landing', which the consulting company presented at the Forum in Krynica. It describes the present economic situation in 15 countries in the region and the reasons why growth has been halted there.

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