E. Europe may grow in 1994: UN

E. Europe may grow in 1994: UN

GENEVA (Reuter): Eastern Europe may show one percent growth in aggregate output in 1994, the first year of expansion since the Communist system collapsed, the United Nations says.

But analysts at the world body's Economic Commission for Europe (ECE) said there was little chance that production would expand this year in Russia, plagued by what it called "paralysis in macroeconomic policy".

Other former republics of the Soviet Union faced continued deep economic depression as their terms of trade with Moscow deteriorated even further, according to the ECE annual report, "Economic Survey of Europe in 1993-94".

Total output in eastern Europe probably fell by about three percent last year, less than half the rate of decline in 1992, according to the 200-page report written by ECE economists.

"Altogether, aggregate output in eastern Europe might rise in 1994, perhaps by a modest one percent, but it would be the first year of growth since the collapse of the old system."

"There seems to be little chance of the decline in output in Russia and most of the other Commonwealth of Independent States (CIS) countries coming to an end in 1994," the report said.

The Geneva-based ECE predicted growth of about four percent in Poland, and recovery in Slovenia and the Czech Republic, with growth rates of around one and two percent respectively.

The forecast for Hungary ranged between a continued fall in output and a mild recovery, while an austerity program agreed by Rumania with the International Monetary Fund (IMF) seemed set to produce zero growth this year, according to the report.

Large domestic imbalances implied a year of stagnation or even further fall in output for Bulgaria and Slovakia.

"Inflation rates and budget deficits remain high and government policies are still constrained by the need to reduce them," the UN agency said.

Unemployment remained a major economic and social problem in the transition economies, affecting an average of 14 percent of the labor force in eastern Europe and probably between five and 10 percent in Russia, according to the UN economists.

The ECE report said the situation in Russia remained very different to that in eastern Europe.