Egyptian Unrest: What does the future hold?

The Egyptian unrest is causing a lot of unrest in several parts of the world. The other Arab states are worried about the reactions of their own people to it. The Israelis are worried about the composition of the next Government and its attitude towards the Israeli state and Jews in general. The West, especially the United States is worried about losing a long time agent who served them well and perhaps, beyond expectations.

Being a peoples’ movement, it is difficult to predict how things would shape up there. Till things clear up at the ground level, everyone’s waiting with bated breath.
The smile pockets a rattling controversy.

Macedonia economy: Crawling out of recession.

The former Yugoslav Republic of Macedonia, considered among the poorest countries in Europe, is slowly crawling out of the recession brought on by the global economic crisis.

According to the International Monetary Fund, Macedonia is likely to record a 2% growth in its economy in the year 2010, after declining by 1.3% this fiscal. The IMF identified, among others, two major problems for Macedonia, namely, the balance of payments position, and its international reserves.

Last week, the Macedonian Parliament voted in a new budget that envisaged a fiscal gap of 2.5% in GDP for 2010. The budget is aimed at maintaining macroeconomic stability, while giving a boost to the economy. There is no increase in taxes and no additional burdens have been imposed on the corporate sector. However, two issues that the Government needs to address are the high levels of unemployment, and the lack of FDI that could help speed up economic development.

The three major components of the Macedonian economy, in order of importance to their contribution to the country’s GDP are Services, that contribute nearly 60% to the GDP, and provide employment to over 50% of the workforce. Among the services, Banking, Real Estate, Telecommunications, and Transportation services are worth mentioning. Second in importance is the manufacturing sector that contributes about 28%+ to the GDP, and provides jobs to over 30% of the workforce. And lastly, the Agriculture sector that contributes about 12% to the GDP, and provides employment to about 20% of the workforce.

Among the major agricultural produce of Macedonia are vegetables, fruits, wine, etc., and the major industries include food and beverages, iron and steel, cement, and pharmaceuticals. Macedonia exports iron and steel, wine, foodstuffs, and tobacco, and imports equipment and machineries, automobiles, chemicals and foodstuffs.

The Macedonian economy appears to be delicately balanced, and an overall improvement in the global economic environment should see the country out of recession, and onto the growth path.

Albanian economy: Better than expected performance.

The Albanian economy, in the process of transition from a centralized one to a market oriented one, has not done so badly with an average of 5% growth in the last five years.

Among the last of the closed economies, if not societies of Europe, Albania has pursued sound macro-economic policies that has paid dividends over the last half a decade. But for the current global recession, its economic position might be even better.

For fiscal 2009, Albania has so far logged in around 4.5% growth in the first half. But it is feared that the second half may not be so good and growth may come down a bit. According to the IMF, the overall growth for 2009 is going to be only 2% as against the projected 5% by the Albanian Government. But this again is an upward rivision from 0.7% that the IMF had projected earlier. Whereas the EBRD projects 3% growth for 2009. And for fiscal 2010, the IMF projection is 3%, while that of EBRD is 1.6%.

As a whole, Albania has done better than expected, and much better than its other European neighbors, where negative growth is a fact of life on account of the global recession. One of the major reasons for the mild impact of the recession on the Albanian economy, according to the EBRD is said to be the “relatively strong banking system” of Albania.

The South East Asian nation confronts problems related mainly to its legacy of centralized planning and execution, lack of private enterprise, the poor infrastructure, and very low foreign direct investment, on account of the poor business environment. The Albanian Government is addressing these issues earnestly, and it is expected to fetch results in the future. If the Government keeps up the momentum of reform and fine tunes its economic strategy in the light of the ongoing economic developments worldwide, Albania may in the near future notch up a creditable economic performance, that would increase its stature in Europe and elsewhere.

Romanian economy in the grip of an economic Dracula.

Romania may be in the grip of an economic Dracula, that is sucking out the blood from it, and leading to its painful demise, as it were.

According to the country’s Finance Minister, the economy is likely to contract by 8.4% to 8.5% in 2009. This matches up with the forecasts of the IMF that has extended an economic lifeline to the country. However, if things do not improve fast, this lifeline could end up as a noose around Romania’s neck.

Among the problems that Romania is now facing is a possible sovereign bankrupty, for want of funds to run the state and its institutions. Whichever facet of the economy one looks at, reveals a negative factor. Unemployment is rising by the day. Stock values are falling without a check. Investors are bleeding non-stop. Public debt is mounting without an end in sight. Trade deficit is on the rise. The real estate sector is reeling from the effects of the economic mess. Businesses are folding up and even the Banking industry is yelling for help from the Government.

In the scenario obtaining in Romania today, it was inevitable that IMF enter the scene, with all its conditions to bail out the economy, with a generous dose of money. But the fact is that, the major part of this money is going into shoring up the national currency that has been battered in the market, and the financing of the trade deficit. As Romania gets deeper into economic trouble, the IMF gets a tighter hold over its economy and system, enabling it to dictate terms that are likely to cause hardship to common Romanians, without a correspondingly beneficial fallout of these measures, as history has shown.

Only time will tell how this unfolding crisis is going to pan out in Romania, and how it is going to affect the rest of the world.

Hungary economy: Free, but struggling.

Hungary the ex-Soviet bloc member broke out of the bloc and adopted a market oriented economy. But though free, it is struggling now in the face of the global recession.

The country, now participating in a IMF sponsored economic program, has to achieve a budget deficit target of 3.9% for 2009, and 3.8% for fiscal 2010. In order to meet this target, Hungary also cannot ignore other aspects of its economic development process.

Unemployment, that was virtually unknown in its communist days, now stands at around 9%. The Government has taken important stpes to deal with the situation. It has launched a strict austerity program, to cut down on wasteful expenditure. On the other hand, it has increased state spending to stimulate the economy. Reforms of the ta collection systems are expected to fetch some handsome dividends in the near future. But all these measures are likely to ring results after a few years.

For now, Hungary is said to be facing the worst economic situation in the last two decades. Industrial output is down. Investment is down. Unemployment is up. The IMF lifeline of USD 25. billion comes with conditions difficult to adhere to. Blancing priorities is a real test of not only competence, but also intentions.

Hungary is presently forced into a economic corner, and has to cut subsidies to the public sector, mortgages of property, public transport, and such other areas, which its citizens have taken for granted.

These measures are bound to alienate the public and make the job of the Government more difficult. Investor confidence is, on the other hand, is dictated by the tough measures undertaken by the Government to create a environment for growth and development.

All in all, it is going to be a tough time for Hungary.

Greece: In for some serious economic trouble.

Greece, which evokes images of learning and wisdom, could itself do with some of it in the sphere of economic management and development, right now.

The debt-ridden country has taken a big hit in the economic crisis, in spite of the absence of toxic assets in the Banking sector, unlike some of its Western cousins. While some of its Western counterparts are slowly emerging out of the recession, Greece is seen noisily slipping into it, what with political uncertainty expected to follow an inconclusive snap parliamentary poll in October this year.

Greece has been delaying economic reforms for a long time, in order to avoid a public backlash. However, no sooner did it propose austerity measures, were there violent street protests against the same. The October polls are likely to bring in even more uncertainty to Greece, both politically, as well as, economically.

That the Greek economy is in trouble is an understatement. With its largest industries and major revenue earners namely, tourism and shipping in bad shape, the economy has taken a dive in negative waters. Other industries like food processing, tobacco processing, mining, and petroleum are also not said to be in the pink of their health.

Markets are jittery over the prevailing situation. Sovereign bond ratings have been downgraded by the rating agencies. With a sky-high national debt of nearly 104% of GDP, other Euro zone members are concerned at the impact of bailing out Greece, on their own economies.

Greece has long been a weak link in the Euro zone chain of economies, and what happens to it or in it, is of utmost importance to the other members.

The solid Swiss economy survives a few hits.

The land of numbered accounts, cheese, cuckoo clocks, precision watches, et al, has not escaped the effects of the global meltdown, but has faced the challenges much better than many others, and is poised to come out of the crisis, in better shape.

Known for quality products throughout the world, the current crisis has hit Switzerland hard, though the Swiss continue to smile through the crisis, because of their self-reliance, and prudent savings and spending habits.

A neutral country, Switzerland has not had to expend money on arms and ammunitions, and has capitalized on this national trait in the crisis, and accumulated savings, instead of spending, especially on credit. This has provided a cushion to the Swiss, who have kept up a modest level of consumer spending that has kept their small and medium businesses in good health. With France and Germany, two of Switzerland’s biggest trading partners, on the road to recovery, from statistics released recently, the Swiss have reason to smile, as they expect their exports to these countries to pick up from the current lows.

An area of concern, however, is the rise in the unemployed, which is not the normal trend in Switzerland. With the economy said to have contracted by about 3% in fiscal 2009 so far, it is definitely a cause for concern for the Swiss Government known for its welfare measures and pro-people policies.

The Swiss are optimistic of their recovery because of the serious and prudent Government initiatives taken. Apart from that, there are certain natural advantages that the country has enjoyed for long. For instance, financial services firms are attracted to the tiny country for the sheer quality of the services and talent available there in Banking, welath management etc. An added bonus are the liberal tax laws that attract all kinds of businesses from all kinds of places to Switzerland.

Above all, the nature of the Swiss people, not given to excesses in money matters,and their disciplined approach, should see them emerge stronger from the crisis.

Italy, a long way to go before recovery.

A country full of beautiful and scenic spots, Italy is in the throes of a economic crisis that appears just about to loosen its stranglehold on the country. The reason for this bit of optimism is the same as in the case of several other countries-that the economic contraction in the second half of fiscal 2009 is lesser compared to the earlier quarters!

One of the major reasons affecting the Italian economy, even otherwise, even before the recession, was slow economic growth on account of various regulatory issues, public administration issues, etc. Italy has recorded poorer growth compared to other eurozone and OECD states.

The financial system in Italy has not suffered as much as in other western countries, mainly because of the prudent principles adopted in credit and investment. That apart, the public debt of Italian Banks is said to be of a lower level.

However, interbank markets are beset with problems of liquidity, and the Governemnt, along with the Central European Bank had to intervene to smoothen out things to ensure proper functioning of the system.

A combination of the global crisis and certain outdated laws in relation to labor issues, the legal system, tax structure, etc., may compound Italy’s economic problems and delay the much needed recovery, that is bleeding the country and its institutions.

Political instability has always been the background of anything Italian, and it has compounded the economic crisis, on account of lack of consensus, and contrary policies.

The grave situation now prevailing in Italy may compel the Government to act fast and judiciously, to tackle the problem. And if the Italians can get their economic act together, they may come out of the crisis faster than expected. It depends upon their resolve.

German economy still in the woods.

Good news, like the bad, is infectious. And so, when the Federal Statistics Office announced an unexpected 0.3% rise in the Gross Domestic Product, there were quite a few smiles going around in the German Fatherland.

However, like in the case of France, Germany’s recovery also may be a transient one that might not last long. Because the German economy is said to have shrank by almost 7% in the second quarter of fiscal 2009. One of the major concerns of the German Government is the increase in the jobless queues with unemployment standing at 8.20% in July 2009. This, despite employers reducing working hours of employees rather than laying them off.

But unless there is actual improvement in demand and consumption, this strategy may not remain successful for long, and may inevitably lead to large scale lay offs, anyway.

Coming to specific sectors of the German economy, the Banking sector, that is one of the major culprits in the present global crisis continues to be of concern to the German Government. Government support extended to the Banking sector, while shoring up the sector and saving it from collapse, has also sent the wrong signals about its viability and ability to survive the crisis independently. So long as important sectors of the economy are on Government support and sustenance, the situation cannot be said to have improved.

The manufacturing sector in Germany that churns out high quality and durable goods, is said to be keeping its head just above the water with increasing overseas demand. This is attributed, in part, to the stimulus programs launched in various countries, enabling import of goods and services. Germany has been a major beneficiary of such stimulus programs, apparently.

However, there appears to be a near consensus among the experts that Germany is not in the situation prevalent in the 1930’s during the Great Depression.

France moving tentatively towards recovery.

Forecasting, particularly economic forecasting can be quite a tricky business. Few experts and specialists had an idea of the economic crisis we are going through now. And so, when forecasts are made about supposed recovery in the economic situation, one tends to take the news with a pinch of salt.

The news about the French economy being out of the worst phase of recession and headed towards more sunny climes, though music to French ears, has drawn lukewarm cheer from French business and industry. Having burnt their fingers badly not long ago, commentators do not wish to been misleading the public again with their grand predictions and pronouncements.
The July 2009 data for industry, commerce, and the economy in general seems to be encouraging, with consumer spending reportedly having improved, and manufacturing activity picking up, or rather, not falling further, and so on.

And in the current depressing scenario, even a slight drop in the negatives, is reason for cheer. The actual situation may be that certain factors may have combined to present a transient positive picture. The question is how long this transient phase would last, and at what point may it be considered to have upgraded from the transient to the stable and permanent.

All kinds of statistical tools are employed in supporting theories of an economic rebound, but in the end, unless the ground level situation does not improve, it cannot really have a positive impact on the overall economic situation.

It is still early days for a French economic recovery, though there are strong pointers to it. In the meantime, the French may want to follow the advice popularly attributed to Marie Antoinette to eat cake if they could not afford bread!

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