Since the collapse of socialist system in 1991 the 12 countries under study1 have committed themselves to pro-market reforms. In Poland and Hungary this process had started some years earlier. All these countries are undergoing the transition period which is characterized by the elimination of most state subsidies, decentralization of decision making, privatization and the abolition of price and wage controls. The former tradition of soft budgets, guaranteed employment and low open inflation is being abandoned, too.
Transition to market mechanism means the elimination of non-competitive products, even industries and radical changes in the ownership structure. This, combined with the collapse of the Comecon and Soviet Union, has caused a deep economic recession in the whole area. The output decline started in 1989 – 90 continuing till 1994 – 95 in most of the countries of the region. A slow upturn may start around 1996 but the GNP of these countries is projected to be lower in 2000 than it was in 1990 (with the exception of Poland).
In the best performing countries in transition national income has declined 20 – 30% in 1990 – 94, in Romania, the Balkans and Baltic states considerably more. In order to attain the level of 1990 an annual growth rate of 6 – 12% should be achieved in the late 1990s which is beyond the reach of most of these countries. The only exceptions are Poland, which probably will show growth in 1992 – 2000, and the Czech Republic, which may attain the level of 1990 by the end of the decade.
Unemployment has risen to the common European level of 10 – 15% (in the Czech Republic only 3%, in Bulgaria 17%) but inflation has been considerably higher, 20 – 40% (in Bulgaria even 75%, Romania 200%, Lithuania and Croatia still more). In the Baltic states high employment levels have been artificially maintained.
Declines in real incomes and construction activity will adversely affect the consumption of forest products, which will be at a lower level in 2000 than they were ten years earlier, the only exceptions being Poland and the Czech Republic.
As for consumption estimates for 2000, certain national experts appear to be over-optimistic as we have to postulate, that by then the common economic laws of the market system will be valid in those countries also.
| Country | Decline of GNP 1990 – 94 | Unemplovment 1993 | Consumer Price Inflation in 1993 |
|---|---|---|---|
| % | % | % | |
| Poland | -10 | 14.7 | 37 |
| Czech Republic | -21 | 2.6 | 20 |
| Slovakia | -35 | 12.5 | 25 |
| Hungary | -22 | 12.6 | 22 |
| Romania | -43 | 9.3 | 256 |
| Albania | -43 | .. | 85 |
| Bulgaria | -40 | 17.0 | 75 |
| Slovenia | -20 | 14.4 | 25 |
| Croatia | -79 | 17.2 | high |
| Estonia | -34 | 2.0 | 37 |
| Latvia | -55 | 5.0 | 109 |
| Lithuania | -74 | 1.4 | 403 |
Sources: Ekonomika strední…. 1994, Hunya 1993
Economic prospects seem uncertain also beyond 2000. Adoption of a new economic culture securing efficient functioning of markets is considered by many to take one to two generations. Some countries, especially the so called Visegrad-group (Czech Republic, Slovakia, Poland, Hungary), but also Estonia and Slovenia may have a certain lead in this respect. Nevertheless, it is advisable to forecast at best modest economic growth for the period 2000 – 2010. Beyond that the market structures and behaviour may already have established themselves, which may secure a more rapid economic growth. All this will also be reflected in the consumption of forest products, especially in those which have high income elasticities (i.e. paper). This rather gloomy picture may change somewhat if the countries in transition are integrated into European Union.
The economic outlook in the region is not uniform. Certain countries (Romania, Croatia, Lithuania) are plagued with low production levels and high inflation. These problems may prove chronic and economic take off may be delayed. The Baltic states, which have lost much of their former markets and raw material supplies in CIS, are along with the Balkan states in the most difficult situation.
Economic problems are in certain countries connected with political risks which in the worst scenario may erupt in civil unrest and cause the total collapse of our forecasts. There is a potential of nationality conflict in the Baltic states, Slovakia and Romania. Besides, in the Baltic region and the Balkans a possibility of a wider international conflict cannot be excluded either.
