East Europe GDP to Stall in 2013 on Euro Woes, Moody’s Unit Says

Efforts by Poland, the Czech Republic and Hungary to revive economic growth in 2013 will be stymied by recession in the 17-nation euro region and weak domestic consumption, Moody’s Analytics said.

Poland’s economy will probably grow 1.9 percent this year, compared with 2 percent in 2012 and 4.3 percent in 2011, Tomas Holinka, an economist at the unit of Moody’s Corp. (MCO), said today in an e-mailed report from London. Czech gross domestic product will advance 0.3 percent, while Hungarian GDP will shrink 1.2 percent, he predicted.

“Exports were the only source of growth for all three economies in 2012 as rising unemployment, negative real-wage growth and fiscal austerity have restrained consumer spending at home,” Holinka wrote. “With around 75 percent of their exports going to the EU this could be problematic for future growth.”

Eastern European economies are suffering because of deteriorating trade and banking ties to their western neighbors, which are grappling with a debt crisis. The euro region will shrink 0.3 percent this year, the European Commission estimated in February.

Weak investment poses another risk to eastern Europe’s long-term growth prospects, Moody’s said in the report. Fixed investment is falling as a share of Czech and Hungarian GDP, with signs that a similar trend may have begun in Poland, it said.

To contact the reporter on this story: Bryan Bradley in Vilnius at bbradley13@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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