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Eastern Europe: UN Says 1996 Was A Disappointing Year For Economies

  • Breffni O'Rourke

Prague, 22 April 1997 (RFE/RL) -- The United Nation's Economic Commission for Europe (ECE), in a survey just released, says that Central and East European states have been through a disappointing year. And the survey suggests things may be only a little easier this year.

The ECE report says the outlook for 1997 in Eastern Europe is mostly for modest growth, although Romania and Bulgaria can expect to see continuing shrinkage of their economies because of tough stabilization programs.

The Baltic states however, are seen as doing better than average, with further recovery in sight this year after a reasonable performance last year. It said growth in the Baltics could be as high as 4.5 percent in 1997.

By contrast, Russia and Ukraine are more problematic. The ECE report says that the Russian government expects a modest upturn during this year, but notes that this possibility is widely doubted by economic analysts, who would regard even a "standstill" as an achievement. The ECE says much depends on whether the problem of wage and tax arrears can be resolved in a non-inflationary way. As to Ukraine, the economy there is still in deep depression, but might bottom out this year.

Summing up the gloomy aspects of the past year, the report said economic growth around East Europe slowed more than expected. In Russia, the economic slump deepened instead of stabilizing. In the former Yugoslavia, the expected boost in economic activity resulting from the end of UN economic sanctions were slow to materialize. There were also major economic setbacks in Bulgaria and Romania, and in Albania an economic crisis developed into political and social turmoil.

The ECE said these economic developments in Southeastern Europe, and the turmoil that broke out in Albania, underline in a dramatic way the fragility of the process of transition from command to free-market economies. This, combined with the setbacks in other Eastern countries, raise important issues about the sustainability of the transition process -- not only for the countries going through the process, but for those countries and institutions helping it.

The survey says overcoming these problems needs long-term commitment on both sides. It requires also a "more generous, better focused, and much speedier" delivery of help, both technical and financial.

Quick aid will help transition governments, slow aid on the other hand, could have "perverse" effects. The ECE says such assistance should not be regarded as an act of generosity by the West, but as enlightened self-interest. It notes that chaos and destruction can have spill-over effects which could reach the rest of Europe.

Unemployment in 1996 continued generally to rise, being just under 12 percent in Eastern Europe by the end of this year. The ECE says that in the Baltic states and the CIS countries the official registered unemployment rate, at 6.5 percent by year's end, was rising. But because of the statistical methods used, the official rate probably understated the true picture.

Giving some detail on Bulgaria, the ECE noted that the deep crisis there provoked by erratic economic and financial policies which had resulted in a 10 percent drop in gross domestic product and year-on-year inflation of over 300 per cent. As to Romania, the survey says that country experienced relatively strong growth in 1996, but that this was the result of what it called loose policies which by year's end required powerful corrective steps. A fall in Romania's gross national product (GNP) is now expected for the present year.

Looking on the brighter side, the ECE report said the holding down of inflation was one of the transition economies' best achievements of 1996. Consumer price inflation fell or remained stable in nearly all Eastern countries. The most significant progress on the inflation front came in the majority of CIS countries, where stabilization policies started to produce results. Another bright note from the CIS, was the positive GNP growth in seven countries, compared with growth in just two in 1995.