Germany as the Major Destination for Exports

Germany is the major trade destination for exports from five CEE countries:

1. Czech Republic - 30.9% of exports (1-11/08)
2. Hungary - 28.4% (2007)
3. Poland - 25.0% (1-11/2008)
4. Slovakia - 20.3% (1-10/2008)
5. Slovenia - 19.8% (1-11/2008)

Since exports-to-GDP ratios in Central and Eastern Europe are very high (roughly from 50 to 100%), a two-percent decline in Germany's economy this year is felt considerably in orders decline in the rest of "Mitteleuropa" as well.

Note: Lithuania's major export market is Latvia. Latvia's statistical office does not provide the necessary data. Estonia's major export partner is Finland. Croatia's major partner is Italy.

Brokered FDI down by Nearly 60% in Slovakia

Slovak investment agency Sario brokered almost sixty percent less foreign direct investment (FDI) last year compared to 2007. The amount of negotiated investment decreased from €1.28 billion to only €538 million (0.8% of GDP). Official central bank statistics of FDI inflow indicate a similar decline – by almost a third for the first ten months of the last year. However, the central bank data is often revised and contains estimates, which makes the overall numbers less reliable.
The reason for FDI inflow decline is that many companies scaled back their expansion plans due to global financial crisis. Japanese electronics manufacturer Sony, for instance, has been one of those belonging to this group. Other projects have been put on hold by hesitant firms facing uncertain times. Yet, there were a few significant large investments announced. For example, Bratislava-based plant of Volkswagen announced expansion worth €300 million last year.
Sario officials say that 2009 could witness resumption in FDI flows thanks to the Slovak adoption of common currency Euro as of January 1 this year. The agency is currently working on 122 projects bringing potentially more than € 2 billion of capital into the country. Five of the projects exceed € 300 million in value.

Grim Outlook for CEE from Lombard Street Research

In its daily note of January 16, Lombard Street Reseach writes via its analyst Maya Bhandari:

"The unwinding Eurasian savings glut will dominate 2009 economic outcomes. Emerging Europe faces the heaviest adjustment. The CEE-4 are amongst the biggest "borrow and spend" economies in Europe, with large external financing needs. But they also share the Asian Tigers' dependence on foreign demand for domestic growth, with two nasty twists – many banking systems are directly tied to the global crunch, and scope for policy action, both monetary and fiscal, is restricted."

TREND Watch Monthly on Slovakia's Economy

Is available at the Ministry of Foreign Affairs' website (in English). Soon with the December issue. Note: Author of this blog is also the author and project manager of the above-mentioned product.

Hagara the New Chief Analyst of ING Slovakia

Since January 1, the new chief analyst of ING Slovakia is Eduard Hagara, aged 29. Hagara, born in Kežmarok, replaced Ján Tóth, the chairman of the Club of Economic Analysts, after almost ten years in this position. In 2003, Hagara co-authored a paper (in Slovak) on the similarity of demand and supply shocks in European countries with Jarko Fidrmuc. The study was published in Politická ekonomie in 2004. He obtained a degree in economic and financial mathematics from Comenius University in Bratislava, and worked for ING for almost five years. He is a four-time Slovak chess champion. E. Hagara this way joined the ranks of young economists in senior analyst positions in Slovakia, following Vladimír Vaňo (30), who became the chief analyst of Volksbank Slovakia in fall 2007.

Lipták on Sustainable Use of Natural Resources

An essay of one of our contributors, František Lipták, with which the author participated in the International Year of Planet Earth in Paris. The essay was presented at the National and Regional Economics conference in Herľany, Slovakia, held on October 1-3, 2008.
Abstract:

"In our paper, we analyze issues concerning sustainability of natural resource consumption involving contemporary problems emerging from their increasing scarcity. After brief historical outline, we discuss issue of natural resource use according to various policy approaches dealing with tax policy, externalities, institutions and technological progress."

Working on Paper Bringing More Science to Politics

Here's an excerpt:

"Whenever a quarrel in the legislative debate or its part can be reduced to solving an empirical question (of factual nature), scientific method is the one to be followed. For example, a tentative debate over an introduction of a protective tariff could use an argument that “cheap imports from abroad cause higher domestic unemployment.” This argument for a tariff is scientifically verifiable within the realm of economic reserach. This way, the counter-arguments such as “cheaper imports leave more resources in domestic wallets, supporting the local economy in creation of new jobs” or “more import puts pressure on local currency to depreciate, which stimulates exports” or “free labor from uncompetitive industries can move to branches with higher value-added, increasing total income” shall be also given a proper consideration. In the end, thus, a policy decision may not depend on economic misinterpretation of the happenings, but rather on the time preference (that is, short-term- or longer-term-orientedness) of the administration in power."

Any comments on the topic are warmly welcome!

Czech GDP/head higher than New Zealand's or South Korea's

In PPP dollars, according to The Economist (World In 2009).

Average Wages in Visegrád Four Countries

Note: Bloomberg served as the source of data.

The chart above graphs the development of average monthly wages in V4 countries. Inter-country comparisons are difficult however, mainly due to various definitions of gross wage across the region. Comparing total labor costs or net wages instead might make more sense. Due to higher employer contributions in Slovakia, for exmple, the average gross wage is lower than that in Hungary. When comparing net wages, however, Hungarian salaries have been lower than Slovak ones for the last four quarters.

A Narrowing Gap in Europe

This is a re-post of my original blog at etrend.sk (in Slovak), which has been visited by more than nine thousand internet users by now. I am attaching the graph from there to CEEW as well.The chart above shows the development of GDP per head relative to the EU average in three major Eurozone economies as well as several CEE countries. The curves incorporate price levels in various countries through purchasing parity standards (PPS). Thickness of a curve represents roughly the size of a country's population.
One can observe a significant downward movement in case of Italy - by about 20 perc. points within fifteen years. "A lost decade" is currently being felt in Hungary, where GDP per person compared to the EU average is stagnating. Other countries of the region however experience a considerable convergence towards the income levels of the EU average. Slovenia, one of the most succesful countries, will most probably in the medium term overtake its neighbor Italy in GDP per person. This would be the first case of a former Eastern Bloc country to reach higher incomes than a major Western European power.