Recession is biting ever deeper into eastern Europe as a result of the global downturn, official data showed yesterday, with Austria now also in retreat.
The Austrian economy, which has huge exposure in central and eastern Europe, entered recession in the first three months of the year, according to data published by the WIFO economic think-tank on behalf of the government.
Gross domestic product (GDP) contracted by 2.8 per cent in the period from January to March compared with the preceding three months, after already shrinking by 0.4 per cent in the last quarter of 2008.
A recession is technically defined as two quarters of negative growth in a row.
Neighbouring Hungary, which had to be bailed out by the International Monetary Fund, the World Bank and the EU last year, saw its GDP decline for the third consecutive quarter, with the economy contracting by 2.3 per cent in the January-March period.
And Romania, which has enjoyed nine years of continual growth, also officially entered recession, with its economy shrinking by 2.6 per cent in the first quarter after a contraction of 5.4 per cent in the last quarter of 2008.
In Bulgaria, the economy shrank by 3.5 per cent on a 12-month basis, the first time since 1997 that Sofia has reported a drop in GDP.
The Czech and Slovakian economies are similarly in trouble.
In Slovakia, the economy shrank by 5.4 per cent on a 12-month comparison in the first quarter of 2009. And the Czech economy contracted by 3.4 per cent, according to its national statistics office.
Neither Sofia, Prague nor Bratislava provided a quarter-on-quarter comparison for GDP growth.
"The fall was bigger than we expected, there is a considerable influence of the global recession on the Slovak economy," said an analyst with Slovenska Sporitelna bank, Maria Valachyova.
Last month, the Slovak central bank predicted that the economy, which is driven primarily by exports of cars and electronics, would contract by 2.4 per cent this year.
And the European Commission is pencilling in a contraction of 2.6 per cent this year for the former communist country that joined the eurozone on January 1, 2009.
In Austria, the main factor behind the decline in GDP was a collapse in exports, which were down by 4.4 per cent quarter-on-quarter, and a sharp 4.4-per cent drop in investment.
"The worldwide economic downturn hit Austria harder in the first quarter of 2009 than the final quarter of 2008," WIFO said.
"A number of one-off factors - such as the delay in the implementation of the car scrapping bonus and seasonal factors - will have had an additional negative effect."
Household spending fell by 0.1 per cent in the January-March period, while state spending was up by 0.4 per cent.
By sector, the manufacturing sector was hardest hit, with output there plummeting 6.5 per cent quarter-on-quarter.
Nevertheless, WIFO insisted that "the first signs of stabilisation in the global economy are beginning to emerge. Sentiment in both the US and the eurozone has improved somewhat."
WIFO said its own economic survey "appears to suggest the same thing for Austria".
Companies had reduced their order backlogs in April "and that means output expectations are looking more favourable".
Nevertheless, the majority of companies were still expecting to cut back production in the coming months, WIFO cautioned.
"It remains to be seen whether the improvement in expectations will continue in the coming months and herald in a more sustained improvement."