The IMF now forecasts that “emerging and developing Europe” economies to grow 4.5% this year, upping their prediction by 1.5 percentage points from six months ago. This increased optimism is based, in part, on bumper growth in the second quarter of 2017, when Romania’s economy increased 5.7% versus a year earlier, the Czech Republic’s by 4.7%, and Poland’s by 4.4%. By comparison, the EU average was 2.4% growth over the same period.
All of these economies are still heavily reliant on manufacturing, exporting much of their production to the rest of the EU. For example, the Czech Republic—er, Czechia—has the lowest unemployment rate in the EU and about 35% of the Czech labor force is employed in manufacturing, the highest proportion of any EU country. When Europe is growing, demand for the things made in these economies grows. Often this means cars: automakers including Toyota, Volkswagen, and Peugeot have factories in the Czech Republic. Romania’s largest exporter is Dacia, a subsidiary of French car company Renault. [...]
Poland is also benefiting from a surge in workers from Ukraine. It’s estimated that as many as 1 million Ukrainians are working in Poland at any one time, who come for higher wages and more opportunities, especially since the recession that hit after the 2014 annexation of Crimea by Russia. Ukrainian workers have helped address Poland’s demographic issues—an aging population and low fertility rate—in addition to counterbalancing the emigration of millions of Poles after the nation joined the EU in 2004. [...]
For now, the benefits of their economic models seem to outweigh the risks, so the EU’s eastern economies are likely to keep growing, according to JPMorgan’s Amoa. EU funds are there to be invested, central banks have supportive monetary policies, and political tensions aren’t yet at a breaking point. JPMorgan Asset Management is buying these countries’ currencies and government bonds in Poland, Amoa said.
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