Capital Economics expects Poland and the Czech Republic to be among the first countries in Europe to emerge from recession, with a return to growth in 2010.

Kelvin Davidson, property economist for Capital Economics, said: “ Although that might appear to be a positive factor for commercial property in these markets, the fact that they are still substantially overvalued suggests that their property downturns have further to run than markets in Western Europe.”

Although the Polish economy has so far fared pretty well through the global downturn (being the only country in emerging Europe to record a year-on-year rise in gross domestic product in Q1), Capital Economics does not think this will last. Indeed, with the unemployment rate set to rise to around 12% on the Eurostat measure (about 15% on the local measure), real incomes will probably fall outright this year and private consumption growth will suffer. Capital Economics thinks Polish GDP will shrink by -1.5% in 2009 as a whole. The Czech Republic also has its problems and GDP could fall by -5% this year.

However, looking ahead, helped by a boost to the external sector from a weaker currency, Capital Economics believes that Polish GDP will rise by+1% next year, while Czech GDP could be up by +0.5%. Although these figures are still weak, they areboth stronger than Capital Economics’ expectation of zero growth in the euro-zone in 2010.