The Eurozone will remain in recession for most of this year. We see only a gradual improvement in industrial sectors of the Eurozone this year. The feeble recovery that will follow is expected to drag on throughout 2014. Meanwhile, the Baltics, Slovakia and Poland have remained resilient in the face of headwinds from the financial crisis. The only region which has recovered lost manufacturing output from the 2008-2009 recession is central Europe and the Baltics. All economies in central Europe are also under pressure to consolidate their fiscal accounts, which will further dampen expenditures. Total manufacturing production in Central Europe is expected to advance by about 5 to 6 percent each this year and next.
Deleveraging from bad debts has hardly started in Western Europe. Some banking systems remain fragile and unwilling or unable to advance credit. The stronger economies of northern Europe, such as Germany and France, are under-monetized, that is, they suffer from insufficient access to credit relative to output. In the
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