Eleven of the less prosperous members of the European Union – Bulgaria, Croatia1, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, the Slovak Republic, and Slovenia (EU11)—have remained attractive destinations for Foreign Direct Investment (FDI). The Czech Republic, Estonia, and Slovakia witnessed FDI levels in 2012 similar to pre-crisis levels. Poland and Bulgaria also experienced large gains in FDI in 2012.
Persistently high unemployment rates continue to trouble policymakers in developed and developing countries alike—but the recent Job Trends report brings some good news. After successive years of disappointing labor market performance, several countries in Eastern Europe may finally be turning the corner. These countries suffered most during the financial crisis, so the recovery in job creation is much needed to boost family incomes. In the rest of the developing world, the headlines are positive even while we see some moderation in employment and wage growth in Latin America and East Asia.
I have two concerns at this stage. I suspect most observers of the world economy share my first concern that the incipient recovery is fragile, given the continuing economic turmoil in Europe. But I am also concerned with what’s happening with specific groups, such as youth and women. I have a hunch that the recovery is and will be uneven with youth, women and the less skilled having a harder time finding jobs—even if aggregate numbers show steady gains. The crisis hit young workers hard, particularly young men, and countries are dealing with long-term consequences. Unfortunately, few countries know what’s happening with groups of workers because the data are not collected routinely or if they are, the results are available only with a relatively long lag time.
Where recent data are available, the story is mixed. Although youth unemployment remains alarmingly high at 20-30 percent,
Important developments today:
1. Emerging market stocks continue to advance
Emerging market stocks continue to advance. Developing-country equities advanced for fourth day as global investors continued to turn to emerging markets. The MSCI Emerging Market Index gained 0.3% this morning, adding to a three day return of 4.3%. Taiwan (China) stocks climbed to the highest level in more than two years as major global brokerage firms (Morgan Stanley, Goldman Sachs, and Nomura) recommended the island’s equities on improving relationship with China and earning prospects. In contrast, Hungary’s BUX index dropped 1.4% after Moody’s Investors Service lowered the country’s credit rating to one notch above junk (‘Baa3’). Meanwhile, the risk premium investor demand to own emerging-market bonds over U.S. Treasuries widened 4 basis points (bps) to 245 bps, according to JPMorgan Chase & Co. EMBI+ index.
Among emerging markets
In Central and Eastern Europe and the CIS, industrial output in Latvia rose 1.2% (m/m) in October according to the statistics office.
In Lithuania, the unemployment rate fell to 13.9% in November from 14.2% in the previous month, translating into a little over 300,000 unemployed persons in the Baltic nation. Unemployment appears to have peaked in July at 15.3%, after the country encountered one of the deepest recessions in the region, due to which GDP contracted by almost 15% for 2009.