While the developed European countries settle back to normal, albeit low, growth rates, Eastern Europe exchange traded funds (ETFs) could reflect the rocketing growth of emerging European nations. But as with any emerging market, there are some threats to be wary of.
Vienna Insurance Group., emerging Europe’s largest insurer, remarks that the Austrian economy is picking up momentum and the emerging European states will likely see growth accelerate above the slow pace at which Western European economies expand, reports Michael Shields for Reuters. That could well result in an improvement on the flat performance of late in iShares MSCI Austria (NYSEArca: EWO).
However, premiums will increase in 2011 at low percentage rates as companies adhere to austerity measures to help manage their ballooning deficits, says the company. Data shows that unconsolidated premiums written increased 6.1% in 2010.
The European Bank of Reconstruction and Developed recently stated that the threats to the recovery of Eastern European countries could reduce inflows of foreign direct investment and lead to a “sharp” currency depreciation and other financing problems for the region, writes Paul Hannon for The Wall Street Journal. The threats include a rising inflation rate, which could lead to premature rate hikes, and potential “risk aversion” among investors as a result of eurozone problems.
If no problems rear their heads, many of those economies will experience rapid growth, bolstered by a recovering Western Europe and higher commodity prices, says the EBRD. [Russia ETFs: Government Opens Its Doors.]