A number of global economies are in recovery mode, but Eastern Europe and its exchange traded fund (ETF) could still be in for a struggle. The region is still wrestling with a troubled financial system and increasing joblessness.
The International Monetary Fund (IMF) does not believe the emerging market economies in Eastern Europe will recover in the second half of 2009, according to The New York Times. Eastern Europe will miss out on a stronger rebound because of cross-border capital flows.
In the IMF report, the forecast for Emerging Eastern Europe GDP growth is 1.8% as a whole in 2010 after a 5.2% drop in 2009. Individually, the Baltics, Hungary and Bulgaria may see a milder recession while Poland and Turkey could see sizable gains. (Visit our emerging Europe category for more stories on these economies).
The area’s banking system is still troubled and outside countries have warned Eastern European Central Banks and governments to not rush withdrawing stimulus measures. The unemployment rate is also another major headache, with the IMF predicting a rise to 11.7% next year for the euro zone.
The SPDR S&P Emerging Europe (NYSEArca: GUR) has its heaviest allocation to the energy sector, with 44% of the weighting. Financials make up a smaller slice, with 22.5%, which should buffer the impact of any financial turmoil that emerges in the region. It’s also got heavy exposure to countries that are predicted to do well in the coming year. (Read more about Poland and Russia here).
- SPDR S&P Emerging Europe (NYSEArca: GUR): up 63.9% year-to-date; Russia is 63.1%; Turkey is 15.1% and Poland is 11.1%.
For more information on emerging European countries, visit our emerging Europe category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.