Tuesday, March 24, 2009

Don't just look at the US 

In the Baltics, the global recession is biting down hard on economies advancing through transition:
Prime Minister of Lithuania Andrius Kubilius confirmed preliminary forecasts of the Ministry of Finance stating that Lithuania's gross domestic product (GDP) would slump by 10% in 2009, the highest decrease since 1993.

In past December, the Ministry of Finance forecasted that the Lithuanian economy would contract by 4.8% in 2009.

In an interview to the Lithuanian Radio on Tuesday, the prime minister said that it would only be possible to comment on these figures after their official announcement. "The updated forecasts are marked by consistent pattern that Lithuania's economy is falling at a faster pace than expected," stated Kubilius and recalled that the neighboring Latvia forecasted that its GDP would drop by 15%, Estonia � by 9% and Germany � over 6%...
In fact, the Germans are wondering if it won't be worse than that. As a forecaster this tells me export growth, even if the dollar slides, will be worse than we thought. Menzie Chinn looks at this through an IMF report and worries about further downward surprises in world economic growth. But is this a case for fiscal policy expansion?

Read more about eastern European economies here. I think this does a great deal of damage to the goal of EU expansion.