New EU economies outpace 'old Europe' in first quarter

11 Jun, 2004

Just over a month after joining the European Union, its new central and eastern European members have reported a strong economic start to the year, as their manufacturers cash in on an upturn in export markets.
Poland has led the pack among the four largest newcomers, with its gross domestic product expanding by 6.9 percent year-on-year in the first quarter, its best performance in seven years.
Slovakia has reported a 5.5 percent increase in first quarter GDP, Hungary 4.2 percent and the Czech Republic 3.1 percent - all comfortably outpacing the average 1.3 percent expansion in the 12-nation eurozone.
The other countries that also joined the EU on May 1 included four other former communist countries - Slovenia, Estonia, Latvia, and Lithuania - and two Mediterranean islands - Cyprus and Malta.
Economists say that in some central and eastern European countries, notably Poland, growth early this year was boosted by a buying spree triggered by fears of EU-related tax and price increases and was set to taper off slightly later in the year.
Strong exports largely reflect a move of factories and jobs by international companies to central and eastern Europe where labour remains several times cheaper than in western Europe, taxes are often lower, and business conditions have improved. The automotive industry is a case in point.
Consumer electronics, electrical equipment and chemicals industries are also benefiting from the shifting of production eastwards.
And EU hopefuls Bulgaria and Romania that want to join in 2007 are also expecting to expand by five percent or more this year.

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