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Real GDP
change (% change over previous year), 1994-2003 |
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GDP per capita, PPP
US Dollars |
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GDP per capita, National
currency |
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Gross capital formation
per capita, US Dollars |
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Private consumption
expenditure per capita, US Dollars |
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Consumer price index,
annual average (% change over previous year),
1994-2003 |
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GDP at current prices
bill., PPP US Dollars |
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GDP at current prices
bill., National currency |
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GDP as % of total GDP
of UNECE |
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Purchasing Power Parities
(PPP) |
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Exchange rate, annual
average |
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Value added in agriculture,
1995-2003 |
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Value added in industry,
1995-2003 |
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Value added in services,
1995-2003 |
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GDP by major economic
sectors |
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Gross domestic
product (GDP)
The slow-down in
economic growth began in western countries in 2001.
Annual economic growth in the U.S. decreased from
3.8 per cent in the year 2000 to 0.3 per cent in 2001,
in Canada from 4.5 to 1.5 per cent, and in the European
Union from 3.4 to 1.5 per cent. Economic growth slowed
down in all western economies – even
in Ireland, which has experienced the most
intensive growth in the last decade (the GDP growth
rate has been around 10 per cent per year since 1995).
Despite the slow-down, the GDP in Ireland still
increased 5.7 per cent in 2001. The U.S. and
Canada seem to have begun a recovery in 2002
with growth rates at 2.3 and 3.3 % respectively.
In the EU, however, growth was even more sluggish
in 2002.
GDP growth in central and eastern
European countries has followed a somewhat different
trend. Typically, the economies of this region declined
in the years following the collapse of the Soviet regime
(until 1993 or even 1995). After that, the economies
began to grow, until there was another slow-down in
1999. The aftershock of the Russian economic crisis
in 1998 reinforced the economic weakness in the Baltic
area, which went into recession: the GDP growth rate
decreased from 6 per cent in 1998 to –0.2 per
cent in 1999. Five central European countries (Czech
Republic, Hungary, Poland, Slovakia and Slovenia) experienced
some slow-down in 2001 (especially Poland). In south-eastern
Europe there was a recession from 1997 to 1999, largely
due to the war in Bosnia. After those setbacks, the
economic development in central and eastern Europe
picked up pace and the growth rates remained generally
higher than those in western Europe. Despite the unfavourable
external environment (weakness of the western export
market and weak world market prices), the economic
environment in eastern Europe in 2002 remained buoyant
and the area as a whole was still among the fastest
growing regions in the world.
The countries of the CIS typically
experienced a much greater and longer decline after
the collapse of the Soviet regime than in central and
eastern Europe. The growth of the whole region is very
much influenced by the Russian Federation which makes
up over two thirds of the volume of GDP for the CIS.
Therefore, the economic downturn in Russia in 1998
pulled down the GDP growth rate for the region as a
whole. The economies of the Caucasus and central Asian
CIS countries overcame the recession already in 1996
and since then have experienced quite strong growth.
The three European CIS countries (Belarus, Republic
of Moldova, Ukraine) have had a small growth 1997-1999.
However, since 1999 this area seems to be on a good
road to recovery and the economic growth for this region
has been approximately 5% or more each year.
Industrial structure
In western Europe and North America, the industrial
structure does not change rapidly because of their
advanced stage of development. When examining economies
at different stages of development, one observes
that the development of society in general goes roughly
from an agricultural society to an industrial society
and then to a service society. That is, at an earlier
stage of economic development, the share of agriculture
in the economy is large, but over time this share
decreases and the share of industry begins to increase.
Finally economies reach the situation, where the
shares of agriculture and industry are declining
and the share of services is increasing. When looking
at the growth patterns of GDP (gross value added)
in agriculture, industry and services, agriculture
appears to be the most volatile – as it is
greatly influenced by the weather conditions of each
specific year, and has the lowest (sometimes even
negative) growth rates.
In almost all western economies,
the share of agriculture in total GDP is less than
four per cent. The only exceptions are Greece, Cyprus,
Iceland and Turkey. The higher percentage for Iceland
can be explained by the importance of fishing in its
national economy (fishing is included in agriculture).
In the last decade the most rapid drop in the share
of agriculture has been in Ireland (from 7.7 to 3.6
% of GDP) owing to the rapid expansion of the information
and communication technologies (ICT) industry and services.
The development in central and eastern
Europe resembles that in western Europe: the share
of agriculture has decreased in all the countries (except
for a slight increase in Bulgaria and Bosnia and Herzegovina).
However, it is still quite high in the countries of
south-east Europe (in Albania the highest in the UNECE:
51%). Also the share of industry has mostly decreased,
while the share of services has increased. The development
has been quite strong and rapid. In many countries
the share of services is close to or over 60% thus
approaching the same situation as in western economies.
In the CIS countries, the share of
agriculture has in most cases decreased but still remains
at a considerably high level compared to other ECE
countries. The industry also plays quite a central
role. This reflects the phenomenon that can also be
seen in GDP growth figures. The recovery from the collapse
of the Soviet regime began later than in central and
eastern Europe. Therefore, the economies have reverted
more toward an agricultural society. Since the economy
declined, there was also no room for the expansion
of services. However, now the transition process seems
to be rather strong and rapid. In most CIS countries,
industry is growing faster than services and the share
of both is growing at the expense of agriculture.
Inflation
In the UNECE region in general, inflation was higher
at the beginning of 1990s than at the end. In western
Europe it can clearly be seen that up to the time
of the introduction of the Euro in 1999, the price
increases had slowed down. This was greatly due to
the need of the European Union countries to meet
one of the Maastricht convergence criteria to join
the European Monetary Union (EMU), that the CPI must
not exceed by more than 1.5 percentage points that
of the three countries with the lowest inflation.
Fourteen out of the 15 countries of the EU satisfied
the criteria and were eligible to join the single
currency in 1999. Greece did not satisfy the criteria,
and the United Kingdom, Denmark and Sweden chose
to stand aside in the first wave of Euro introduction.
After 1999, the CPI increased again but not yet quite
to the level seen at the beginning of the 1990s.
In central and eastern Europe, inflation
was extremely high between 1991-1993 owing to the unstable
economic situation. Since 1995, the prices began to
stabilize in most countries (an exception is Bulgaria
where the hyperinflation culminated in 1997). Price
increases have not quite slowed down yet in Romania
and Serbia and Montenegro, but in all other countries
of this region the CPI remains well below 10%. The
progress towards price stability and lower rates of
inflation in the 8 EU accession countries (Czech Republic,
Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia
and Slovenia) is also influenced by the limits set
in the Maastricht criteria. If these countries join
the EU in 2004, they have to meet these criteria within
the next few years to be able to join the Euro zone.
In the CIS countries, inflation has
not slowed down as quickly and there are considerable
differences between countries. In the Caucasian area,
prices have stabilized and there has even been deflation
in some years. In Belarus, Russian Federation and Tajikistan
inflation still remains in the two-digit figures although
it is slowing down. In Turkmenistan and Uzbekistan,
for the last few years there are no data available
to assess the level of inflation. However, the relatively
coherent and consistent macroeconomic policies in the
CIS countries in recent years have contributed to the
strengthening of economic growth and macroeconomic
stabilization, which is reflected inter alia in falling
inflation rates.
Real wages in central and eastern
Europe and CIS
At the start of the transition process, in central
and eastern European and CIS countries the real wages
(the wages adjusted by the level of inflation) dropped
dramatically as the wages could not keep pace with
the rapidly increasing prices. In most of central and
eastern Europe real wages started to increase in 1993-1994
and in most countries of the region were 30 to 80%
higher in 2001 than in 1993. The growth has been somewhat
slower in Hungary, Romania and Slovakia. In Hungary,
there was a drop in 1995-96, in Romania in 1997 and
in Slovakia there has been some decrease in 1999-2000.
Owing to these setbacks the real wages in these three
countries in 2001 were only 11-15% higher than in 1993.
In contrast, in Bulgaria prices have been increasing
more quickly than wages since 1994. After the hyperinflation
in 1997, the prices are under control and real wages
began to increase in 1998. Still in 2001, the real
wages in Bulgaria were approximately two thirds of
the 1993 level.
As for the economy in general, the
positive shift in real wages in the CIS occurred a
few years later than in central and eastern Europe.
The low point for many CIS countries was in 1994-1995.
Since then, wages have in general increased more quickly
than prices. Still, by 2001, Kyrgyzstan, Republic of
Moldova, Tajikistan and Ukraine had not yet reached
the 1993 level. As with the CPI, for Turkmenistan and
Uzbekistan there are no data available to evaluate
the situation.
Household consumption
The final consumption expenditure of households characterizes
the demand side of GDP. Its dynamics allow assessing
how the welfare of households has developed on an
aggregated level. It reflects the changes in wages
and other incomes, but also in employment and in
the behaviour towards saving in households. Therefore,
the growth of household consumption can be somewhat
different from the growth of real wages and incomes.
Household consumption expenditures
in western countries have developed quite steadily
since 1995. Typically in western Europe and North America,
an average of 50-60% of GDP goes into household consumption.
In most countries of this area, the increase in household
consumption expenditure per capita 1995-2001 has been
between 10-20 per cent. The highest increase was in
Ireland (44.5%). This was possible owing to the very
high GDP growth rates while household consumption grew
more slowly than the total GDP.
In central and eastern Europe, the
share of household consumption expenditure tends to
be somewhat higher than in western countries, mostly
between 55-65% of GDP. The consumption of households
on an aggregate level has increased in general more
rapidly than in the western countries (albeit at a
much lower starting level) and often more quickly than
the total GDP. Even during the years when real wages
were decreasing in some countries (Bulgaria and Romania)
household consumption decreased much less, or even
continued to increase.
In the CIS countries, the share of
private consumption in GDP ranges from 50% in Russia
to 94 % in Armenia. The average is somewhere between
65-70%. In several CIS countries the growth in final
household consumption has been significant but still
not as high as the growth in real wages.
External debt of central and eastern
Europe and CIS countries
Among the central and eastern European and CIS countries,
the Russian Federation had the highest external debt
in 2001 (162 billion US dollars) followed by Poland
(72 billion) and the Czech Republic (22 billion). Although
the debt for these countries was large in absolute
terms, it accounted for about 40-50% of their total
GDP. From this viewpoint the situation is most difficult
in Kyrgyzstan and the Republic of Moldova where the
external debt in 2001 was greater than the total-GDP.
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