Mideast Turmoil May Undermine East Europe Recovery: Chart of the Day

Rising oil prices driven by turmoil in North Africa and the Middle East may undermine eastern Europe’s economic recovery because industry in the former communist region is less energy efficient than in the west.

The CHART OF THE DAY compares energy intensity, the amount of energy needed to produce 1,000 euros ($1,384) worth of output expressed as tons of crude oil. Bulgaria needed six times more energy than the average of the 15 older European Union members, while Poland is 2 1/2 times less efficient.

“Eastern Europe is dependent on industry, so rising oil prices are a reason to worry,” said Ales Michl, an economist at Raiffeisen Bank in Prague. “The region’s recovery is under threat.”

Oil is trading at a 29-month high after rising 14 percent last week, the biggest five-day gain in a year. The unrest that has swept Africa and the Middle East, ignited by the ouster of the Tunisian and Egyptian leaders, has spread to Oman and Libya, raising concern production may be disrupted further.

All eastern EU economies are set to grow this year, with Slovakia leading the group at 4.3 percent, the International Monetary Fund forecast in October. Romania, which remained in recession in 2010, is set to post the slowest growth of 1.5 percent.

Eastern manufacturers need to boost productivity more to compete as rising commodity prices make output more expensive, Michl said. Countries which reduced unit labor costs during recession, such as the Czech Republic, are in the best shape to cope with the price shock, Michl said.

To contact the reporter on this story: Radoslav Tomek in Bratislava at rtomek@bloomberg.net.

To contact the editor responsible for this story: James Gomez at jagomez@bloomberg.net.

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