http://danskeanalyse.danskebank.dk/link/Ne...Weeklyweek7.pdfThe slowdown is here
Growth has been very strong in the last couple of years in most of the Central and Eastern European countries. However, it looks like growth will slowdown in 2008 and in some countries the slowdown is likely to be quite sharp. There are four "sources" of the slowdown in CEE growth.
First, inflation spike significantly during espe-cially the second half of 2007 all over the region. This clearly contributes eroding consumers' purchasing power and reduce consumption growth.
Second, credit conditions have worsened in most countries in region - both hitting consumers and investors. Third, property prices have turned south and are now declin-ing in a number of countries in the region.
And finally the signs of a slowdown in "old" Europe are now clear and this is likely weigh on CEE exports during 2008.
All in all, the negative shocks to CEE are quite large and expected slowdown during 2008 is likely to be sharp.
Unfortunately, it is the countries with the larger imbalances that have been hit the hardest by these shocks and in these countries the slowdown clearly is already underway.
This is for example very visible in the three Baltic countries where retail sales have plummeted in the later part of 2007. What we are now are seeing in the Baltic economies is likely to be repeated in most other CEE economies in the coming month, even though the slowdown is likely to be less dramatic. Some countries even risk negative GDP growth in the coming quarters.
Negative growth is most likely to unfold in the countries where the negative shocks have been the largest and where imbalances are large - hence countries like the Baltic states, Bulgaria, Romania and Kazakhstan.