More about the European lynx economies

eu.gifA week ago I reported on the EU-8's impressive economic performance. My post was based on an article in The Economist by Edward Lucas, the magazine´s eastern and central European correspondent who happens to have his own blog.

For some elaborated studys of the EU-8 (The Chech Republic, Hungary, Poland, Latvia, Estonia, Lithuania, the Slovak Republic and Slovenia) go see the two reports mentioned below. 

World Bank EU8 Quarterly Economic Report

The competitiveness of CEE in a global context

In his first article Edward coined the EU-8 as lynx economies and now he once again reports on the topic. Strictly speaking the points are the same as one week ago and consequently the key point remains to be the EU-8's ability to shift their activities up the value chain.

"The key to understanding the region's economy is to look at the composition of exports and the Austrian study shows how the lynxes, (the eight former captive nations now in the EU) are doing rather well in shifting their exports from low-value to more hi-tech categories.
It turns out that on almost every count the lynxes are pulling ahead of the second-rank Asian tigers - places such as the Philippines and Malaysia."

However, Edward Lucas also mentions two big problems in the long run:

One is the lack of brainpower as Edward puts it or more specifically the lack of research and development caused by too high expenses, below-par universities and distorting subsidies by rich countries.

The second problem mentioned is the demographics of the Lynx economies and as a part of the Demography.Matters team this obviously has gotten me ticking. So let us scrutinize this one a bit further.*

Edward puts it like this;

"The result is rich-country population structure with poor-country economies. The further east you go, the worse it gets: Georgia, for example, will almost certainly be old long before it is rich. And there's little chance of such poor countries plugging the gap with migration. So the lynxes, both the sleek tribe of central Europe and the Baltics, and their mangier cousins further afield, need to breed a lot faster."

Especially the fertility rates are strikingly informative here ...

Between 2000-2005 all eight of the lynxes figure on the top 20 list of the world's lowest fertility rates.

No. 3 - Latvia; 1.10 TFR

No. 6 - Slovenia; 1.15 TFR

No. 10 - Czech Republic; 1.16 TFR

No. 13 - Hungary; 1.20 TFR

No. 14 - Estonia; 1.22 TFR

No. 16 - Lithunia; 1.25 TFR

No. 17 - Poland; 1.26 TFR

No. 20 - Slovakia; 1.28 TFR

As we see, well below replacement level and as Edward puts it there is little chance to ameliorate the population decline with migration. 

Scrutinizing the median age we find the inevitable result of such low fertility rates especially in the long run (2050) where for example Slovenia and Latvia with a median age of 53.1 and 53.0 respectively are only surpassed by Japan at 53.2 years. Furthermore we see that all lynx economies have negative population growth from 2000-2005 a trend which is exacerbated by 2045-2050 where all lynx economies will face an annual negative growth of their population of (+) -0.50% with Estonia topping the list at -2.04 % in negative annual population growth.

Obviously these long term projections of 40-50 years need to be taken with a pinch of salt since they are based on the continuing of current trends. Migration could present a dark horse here but no-one can tell whether it will pull through.

* Pocket world in figures 2004 edition; publication from The Economist.