Eastern Europe Positioned for 2008 Growth as West Plateaus

---

Researched by Industrial Info Resources (Sugar Land, Texas)--For higher growth prospects in Europe in 2008, it is a case of “look east.” Eastern and central European countries are strategically positioned in terms of world markets and energy routes. The region also has a well-trained and aspirational workforce that is creating a booming manufacturing industry in the region. The growth drivers in the region are private consumption and infrastructure development, as well as a healthy outlook for commodity prices.

Western European steelmakers are now suppliers to the car and domestic-goods manufacturers in the eastern countries. They are in the company of steel producers in Russia and Ukraine who see strong ongoing prospects in the region. The expansion in European Union membership creates an enhanced trading position for the countries that can face east or west or north and south when looking for markets.

The mid-2007 forecast gross domestic product (GDP) growth rates might survive in better shape than currently expected in 2008, as the increase in cost of credit loosens the tight resource capacity in western Europe while allowing an edge to the lower-cost producers in the east. The Slovak Republic was set to move down to 7.5% GDP growth in 2008 from 8.2% in 2007, the Czech Republic from 4.8% to 4.3% and Poland from 5.8% to 5%. Ukraine could drop from 5% to 4.6%. All forecasts in the last quarter of 2007, when financial and trade regulations are bring tuned, would benefit from access to a large ladle of late-2008 hindsight.

Steel production in 2008 in the expanded European Union (27 countries) is forecast to be boosted by healthy developments in Germany, but its full growth potential will be mitigated by adjustments in inventory oppositions. The growth in production of 4% in 2007 will drop to 1.4% in 2008, according to the International Iron and Steel Institute. Total steel production for the union for 2008 is estimated at 195 million tons.

Brazil, Russia, India and China (BRIC) will lead growth in steel production with a rate of 12.8% in 2007 and 11.1% in 2008, when 71% of global steel production will be in the four countries. Russia’s production is estimated to grow 25% in 2007 and 11.8% in 2008, driven by the energy and construction sectors. The latest estimate for production in China for 2008 is 530 million tons in a year, when the central government has proposed curbs and export tariffs. European producers are wary of the amount of Chinese steel coming into their home markets, which they defensively label as “subsidized.” Total global steel consumption is estimated at 1.3 billion tons for 2008.

The mixture of strong currencies and pension and social commitments, along with credit frissons, will see the major western European economies grow about 2%. The global resource shortage may see them able to fill more project gaps in the east as their tight capacity margins ease. Ireland, the Celtic tiger, could drop from 5% to 3.5% compared with the drop of the Baltic tigers, Latvia and Estonia, from about 10% to somewhere above 7%.

The United Kingdom and France will be among the top 10 global recipients of foreign direct investment (FDI) in 2008. A report by the United Nations Conference on Trade and Development (UNCTAD) expects FDI flows to increase over the next three years despite concerns about global financial instability and protectionism in some countries. The report says that access to large and growing markets will be the main driver of FDI growth, followed by access to resources, especially skilled labor. Access to low-cost labor was also noted by many of the 191 transnational companies responding to the UNCTAD questionnaire on which the report was based.

Industrial Info Resources (IIR) provides marketing communication services ranging from industrial database solutions to market forecasting, custom analytics, and specialty promotions that support high-level image campaigns.