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Yugoslavia: Growth List Survey Predicts Surprises

Prague, 12 January 1998 (RFE/RL) -- Some transition economies of East Europe and Central Asia are being placed at the top of the world growth league for this year in a survey just issued in London (on Jan. 12).

The survey, by the influential Economist Intelligence Unit, makes predictions which will surprise many. It says the fastest growing economy in the world in 1998 will be that of Bosnia-Herzegovina, with a massive 35 per cent growth. Second place, equally surprising, goes to Albania with 12 percent growth, and third to the Caucasian republic of Georgia, with 10 percent.

Also achieving a place among the top 20 fastest growing countries are Azerbaijan (7%), and Tajikistan, Kyrgyzstan and Yugoslavia (6% each).

Among the larger Central and East European economies, things are looking generally quite good. Poland tops this grouping with over 5 percent growth predicted, followed by Hungary, (4.5%) and then by Bulgaria (3.5 percent), and with the Czech Republic trailing (3.3 percent).

Not every transition country has rosy prospects for the new year however. The worst place in the survey of over 80 countries goes to Turkmenistan, which is predicted to suffer contraction to the extent of minus two percent. Other sluggish performers near the end of the list are Russia and Slovakia (2% growth) and Ukraine, Moldova and Uzbekistan (all 1%).

A sign of the times is that a former Asian Tiger, Thailand, is forecast as having practically zero growth, less even than Papua-New Guinea.

RFE/RL spoke to the man who compiled the survey for the Economist Intelligence Unit, London analyst Gerard Walsh. He explained the surprising results at the top of the growth league.

He says that a significant factor in Bosnia-Herzegovina's phenomenal growth will be the inflows of international aid to help re-build the ravages of war in that country. Much of the aid funding will be funneled into the restoration of basic services, such as electricity and other utilities, and building roads. He says the investment opportunities Bosnia offers during this initial phase will therefore be in companies which can participate in this type of reconstruction work. Renewal of the country's basic infrastructure is a pre-requisite for attracting further investment later.

Walsh cautions that the growth prediction in the survey is based on the assumption that there will be no major return to fighting. The same general conditions apply for the prospects of Albania, which was hit by waves of civil unrest last year.

In the case of the Caucasian republic of Azerbaijan, oil is seen as the engine of growth. And in Tajikistan, which is just starting to recover from a civil war of its own, it is macro-economic stabilization resulting from a program of the International Monetary Fund (IMF), which should begin to bear fruit this year.

In the case of Poland and Hungary, stable government policies are expected to allow both these economies to go on building on the momentum they achieved last year.

However, a shadow passing across the whole international scene is the crisis in Asia. Walsh explains that the conclusions of his survey were drawn up in December, and already in the few weeks since then, Asia's situation has worsened and its impact on the rest of the world will be correspondingly greater than originally foreseen in the survey.

In the survey, the growth in the overall world gross domestic product (GDP) is already seen as slowing to 2.7 percent in 1998 as a result of Asian contagion. And expected slower growth in the United States, also partly a result of Asia, is amplified by worries of stock market volatility there which could cut into wealth.

One of the big risks of the Asian crisis now, he says, is that it could spread its contagion to Russia's financial markets. So far that has not been a major problem, but he says it could become one during the year.

Overall, Walsh sums up by saying that the generally solid growth rates of the transition economies should provide some insulation from shocks out of Asia.