The Economic Potential of the Ten New EU Countries
With a basis in prognoses from the new World Economic Outlook from IMF, we take a look at the expected economic growth of the EU candidate countries in the coming years.
By Troels Theill Eriksen
In 2004, EU gets ten new members: Estonia, Latvia, Lithuania, Poland, the Czech Republic, Slovakia, Hungary, Slovenia, Malta and Cyprus. Three more countries, Rumania, Bulgaria and Turkey, seek and hope to gain membership in 2007 at the earliest. With this expansion, the doors of Western European companies are opened wider to significant markets that, according to IMF, are facing a nice economic growth in 2003 and 2004. We are going to take a look at the overall economic potential in the expansion.
A market of 170 million people
More than 170 million people live in the candidate countries. Of these, about 75 million live in the ten countries joining the EU in 2004 and about 70 million in Turkey, the candidate country that is farthest from being inducted in the EU.
The diagrams to the right show what the outlook is for the overall economic development in the candidate countries. As a whole, the candidate countries had zero growth in 2001, the reason being the financial crisis in Turkey, which had a negative growth of 7.5 percent in 2001. The other candidate countries had a growth in 2001 of 3.1 percent. In 2002 the growth in the EU candidate countries was 4.3 percent, which is similar to the growth expected by IMF in 2003 and 2004.
Regions and catching up
Besides showing the growth for all the EU candidates, we have also shown the growth in the three regions/groups of countries that are separated not only geographically, but also economically. In the Baltic countries, the high economic growth experienced in 2001 and 2002 is expected to continue in 2003 and 2004. In Central Europe (the Czech Republic, Hungary, Poland, Slovakia, and Slovenia) the growth in the last couple of years has been about a third of the growth in the Baltic countries, but is expected to increase in 2003 and 2004, though it will remain significantly lower than in the Baltic countries. In South/South East Europe, which doesn't include Turkey, the growth in 2003 and 2004 will be marginally greater than the average for all EU candidate countries.
The divergent growth rates in the different regions should be seen in the light of the economic starting point. The Baltic countries, with a GNP per capita of about 8.700 dollars, have more catching-up to do than Central Europe, with a GNP per capita of about 11.500 dollars. In this regard, South/South East Europe is falling a bit behind with a GNP per capita of about 7.600 dollars. In comparison, the GNP per capita of Denmark is about 29.000 dollars, with expected growth rates in 2003 and 2004 of respectively 1.2 and 1.8 percent. The growth in the 10 new EU countries is expected to be about 3 percent in 2003 and almost 4 percent in 2004.
Appetiser
The economic potential in the EU candidate nations can be seen as an appetiser, since a nice economic growth is expected in the coming years with significant opportunities for participants on the market.
We can inform those whose appetite has been stimulated that CIFS and the other participants in the Euroconstruct collaboration in December 2003 has published a report where the economic development in most EU candidate countries is treated in more detail.
Sources
IMF and own calculations
