Central Europe shrugs off effects of credit crunch

While the Baltics sputter, central Europe is proving to be particularly resistant to the effects of the credit crunch and the slowdown in the US, Jan Cienski reports from Prague 

Zdenek Tuma, the Czech central bank governor, said that although a slowdown was expected for the Czech Republic owing to a cooling of growth in the US and western Europe, "it is remarkable how resilient emerging markets really are. Up to now we have managed to be unaffected."

First-quarter growth in Poland came in at an annual rate of 6 per cent, mainly on the strength of strong consumer spending and increases in investment. The Czech economy grew at 5.4 per cent over the same period while Slovakia, preparing to join the euro next year, remained the regional star with growth of 8.7 per cent. Even Hungary, emerging from an economic crisis, managed to improve on last year and grew 1.6 per cent for the first three months of this year.

The countries of central Europe have relied on strong consumer spending, fuelled by a rapid expansion in credit, to keep their economies growing. They have also been insulated because of their floating exchange rates and tough anti-inflation policies.

Local companies have continued to export strongly.