If the first phase of the global economic crisis that spilled into Central and Eastern Europe was set off by flagging industrial production, the next will be prompted by slowing consumer spending as more people lose their jobs and see their income thin out, analysts said.
 
Shrinking orders and tumbling revenues have already forced a gaggle of companies to slash costs and slim down workforces all across the region.
 
"Whereas the first leg of the crisis was led by industry, it will be sustained by the weakness in the consumer sector, not just in the Czech Republic but throughout central Europe. Poland is the same," Neil Shearing of London-based research outfit Capital Economics told Reuters.
 
Retail sales in the Czech Republic nosedived by 7.5 per cent year-on-year in May, the biggest drop since the start of the year. Figures by Eurostat, the EU’s statistical office, show that other countries in the region have seen an even steeper deline in consumer spending. Romania registsred an 11.7 per cent increase, Bulgaria more than 10 per cent and Latvia a head-spinning 26 per cent.
 
"It is visible that the recession, hitting foreign trade, is starting to materialise in domestic demand, and a further decline in GDP in second quarter is to be expected," David Marek, chief economist at Patria Finance, told Reuters.
 
Reduced consumption is expected to tip CEE economies into the rock bottom, something Shigeo Katsu, the World Bank's head for Europe and central Asia region, said it is yet to come. His opinion is echoed by other economists as well.
 
Romania's current account gap shrank by three quarters and Bulgaria's by almost half to 5.8 per cent of gross domestic product (GDP) in May against more than 10 per cent a year earlier.
 
Source: Dnevnik.bg