Here is a brief profile of the economy of each of the main accession and candidate countries.
Czech Republic:
One of the most stable and prosperous of the former communist states, the Czech Republic has undergone a strong economic revival since 1999. Rising exports, supported by a strong inflow of foreign investment, have underpinned growth to date, but domestic demand is playing an increasing role. The process of privatisation and modernisation of the power and telecom infrastructure begun quite late, but is now largely complete. Industrial restructuring is still needed, and moves are afoot to accelerate this process. With GDP growth of 2.9% in 2003, the Czech Republic was one of the slower growing countries of Central Europe, its performance and prospects being closely tied to that of its main trading partners, especially Germany.
Hungary:
Like the Czech Republic, Hungary has successfully made the transition from centrally planned to market economy. The level of foreign ownership of Hungarian business is now very high, with continued inward investment. Hungary has successfully modernised much its telecom and power infrastructure. While the economy is strong, rapidly rising real wages over the past three years are an issue of concern. GDP growth eased slightly to 2.9% in 2003, but a slight acceleration is anticipated in 2004 and 2005 as business investment and exports to the EU pick up.
Slovakia:
From poor beginnings, the process of economic transition in Slovakia accelerated between 2001 and 2003 under the Dzurinda government. Strong export growth and private consumption led to a robust 4.2% GDP growth in 2003. While privatisation of industry and the utilities is nearly complete, deep structural reform in the economy is needed and unemployment, at 17%, remains high. Planned projects suggest a very high level of foreign investment in Slovakia in 2004 and 2005, when the recent strong economic performance is expected to continue. The process of modernising Slovakia's physical infrastructure is underway.
Poland:
After a slowdown in 2000 and 2001, economic recovery in Poland is gaining momentum. The depreciation of the zloty against the Euro in 2003 helped this process. Despite a steadfast programme of economic liberalisation through the 1990s, there is still a lot to be done in state owned small and medium sized business and in the restructuring of politically sensitive areas such as coal, steel, the railways and energy. Unemployment, at nearly 20%, is indicative of the continued need to restructure the Polish economy. In percentage terms, GDP performed well in 2003, with 3.7% growth. A further acceleration is envisaged in 2004 and 2005, helped by strong investment growth. Much remains to be done to upgrade Poland's telecom and power infrastructures.
Baltic States:
With average per capita GDP of around € 10,000, the small Baltic States are poorer than most of the other accession countries. Having been strongly tied to the economy of Russia and having suffered as a result in 1998, the Baltic States have looked more towards Europe in recent years, with impending EU membership being a major driver of policy. Unemployment in each of the Baltic States stands at over 10%, and the need to restructure much of the nations' industry and agriculture is still pressing. Despite this, the Baltic States are proving to be a favoured location for foreign investment, and private consumption is performing well. GDP growth rates in 2003 stood at 5% plus; similar rates are expected in 2004 and 2005.
Slovenia:
With its different background and strong traditional links to Western Europe, the Balkan State of Slovenia has had less difficulty in transition than the former Soviet countries. Slovenia is the wealthiest of the accession group. GDP growth in Slovenia slowed in 2003 to 2.3%, but private consumption remains strong and a rebound in exports is expected to lead to stronger economic growth in 2004 and 2005. Some structural reform of the economy is still underway, especially to ease foreign participation in Slovenian business.
Bulgaria:
Among the applicant countries, Bulgaria is the richest, but its per capita GDP is still only 70% of the poorest of the recent accession countries. Bulgaria was achieved steady economic progress since 1996, when a sharp recession led to the fall of the then Socialist government. An IMF standby loan is supporting Bulgaria's efforts to overcome high rates of poverty and unemployment. With 4.3% growth, GDP performed well in 2003. With economic policy geared to stable growth and structural reform, Bulgaria is benefiting from its expected EU membership with strong growth in foreign direct investment. Domestic demand is also strong, leading to a worrying increase in imports.
Romania:
The heritage of the former communist period left to Romania was particularly unfortunate, with its obsolete industrial base and output unsuited to the country's needs. From 2000, having emerged from a deep recession, the economy has performed quite well, achieving 4.9% growth in 2003. The process of privatisation is progressing slowly, and unemployment remains high. Although growth is unhealthily biased towards domestic consumption, a sustained rise in GDP at about the rate achieved in 2003 is expected. Considering the overall state of its economy, power and telecom infrastructure in Romania is in a reasonable state.
Turkey:
The Turkish economy exhibits a sharp contrast between a quite dynamic private industrial sector and a hugely inefficient state controlled industrial sector and backward agriculture. Robust economic growth in Turkey over the past decade has been interrupted by sharp declines in output, occurring in 1994, 1999 and 2001. This reflects deep imbalances in the Turkish economy. Following extremely high inflation and an economic crisis in 2001, the support of the IMF has helped tighten the financial management of Turkey. Although inflation remains at nearly 20% p.a., stable and quite rapid economic growth is being achieved, GDP rising by 5.8% in 2003. With more certainty about economic prospects, investment is improving, but foreign direct investment remains low. The telecom infrastructure of Turkey is undergoing rapid modernisation.
