The Two-Way
6:09 pm
Wed April 9, 2014

Turmoil in Ukraine Clouds The Region's Economic Outlook

When Americans envision the European economy, they may think of modern factories churning out sleek German cars and chocolatiers perfecting Belgian truffles.

That developed part of Europe is perking up. The International Monetary Fund said this week that, coming out of a crushing recession, Eurozone growth should be around 1.2 percent - sluggish but steady this year.

Another part of the continent, however, is anything but steady these days. There are 31 countries in a big grouping that includes the so-called "emerging Europe" and Central Asia. So we're talking about less-developed countries like Hungary, Romania, Turkey, Georgia, Albania, Slovenia, Tajikistan and many others.

Oh, and Ukraine, where further Russian military action is a possibility.

On Wednesday, the World Bank issued a report saying "economic volatility and political tensions" are making it difficult to forecast where the region's economy is heading.

This year, it may grow at a fairly brisk 2.7 percent – or fall into recession, with the economy shrinking by 0.2 percent, said Laura Tuck, vice president for the World Bank's Emerging Europe and Central Asia region. As forecasts go, that's a huge span of possibilities.

"The large range reflects the high degree of uncertainty and geopolitical risks faced by the region since the Ukrainian crisis and subsequent East-West tensions," Tuck said.

Here's the problem: many of these 31 countries are clustered around and near Russia, which may become the target of tougher economic sanctions imposed by the United States and northern European countries.

The World Bank concluded: "Geopolitical uncertainty and weak economic fundamentals have weighed heavily on the region, putting these risks at the forefront. Lower growth in Russia is likely to dampen economic activity among its trading partners. "

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