This report looks at the principal emerging market economies in Central and Eastern Europe: the Czech Republic, Hungary, Poland, Romania and the Russian Federation.

These countries have a common background as 'Iron Curtain' countries - 'satellites' of the former Soviet Union, to use the anachronistic jargon of the Cold War. For 40 years their economies were directed by autocratic ideologues; the fabric of pre-war society was comprehensively reworked, every fibre altered. 'Consumerism' and 'the market place' consequently passed this region by.

While there are certain strong similarities between the countries that are reviewed, each is a unique entity, with its own set of demographic, economic and social traits. This report aims to distinguish these characteristics.

One significant feature of these countries is their generally static or declining population size. Most of these countries have 'Western' - i.e. low - birth rates but 'Eastern' - high - death rates. This situation has come about quite rapidly, over the last 15 years or so, but already, in Hungary and Russia, at least, the effects are quite noticeable. It is possible that, as their economies pick up, so the population decline will be reversed, but already the situation is so serious that immediate action is necessary.

The period since 1989 has been marked by severe recession, together with high inflation - in some cases, hyperinflation - and rapidly growing unemployment. These have all been symptoms of adjustment from an economic regime of central direction and state subsidy to one of entrepreneurialism and market forces. There are signs that this period of adjustment is reaching a conclusion - their economies restructured and recapitalised, prosperity - for some - is beginning to return. Even so, the social strains caused by this adjustment have been immense.

By most Western standards, these are still poor countries. They are emerging markets with the potential for much more growth, provided the lurking dangers of economic mismanagement can be avoided.

3.1.1 Czech Republic

The Czech Republic has experienced dynamic growth since its separation from Slovakia in 1993. It was fortunate enough to have a good industrial sector which has adapted quite readily to capitalism. Privatisation and foreign investment have boosted productivity and output at a pace which has allowed the country to avoid the high rates of unemployment suffered by the other countries. Inflation too, has not been as bad as elsewhere. Increasing disposable income has stimulated retail turnover, as well as imports.

The Czech Republic is well located in relation to other markets in Central Europe - Germany, Poland and Austria - and the regional economy is generally good, even prosperous. There is much informal cross-border trade, in addition to the recorded inflows and outflows. The Czech Republic is also an increasingly popular holiday destination, offering mountain scenary together with centres of culture such as Prague.

Consumer spending fell sharply in 1991 and has still not recovered the lost ground.

3.1.2 Hungary

Hungary's population is in decline, and male life expectancy has suffered an alarming reversal in recent years. This has been attributed to lifestyle factors such as diet, alcohol abuse and general stress. Hungary has advanced far in its transition to a market economy, but this has involved redundancies and fiscal austerity, which have taken their toll in social terms. It is known that the government wishes to promote a form of 'family values'. Given a general awareness of health issues, one might expect to see a trend to healthy eating, away from the traditional preference for rich, fatty and highly seasoned foods.

Consumer spending declined from 1989 to 1993, and is still in the process of recovery.

3.1.3 Poland

Of all the countries surveyed, Poland has come furthest in the transition to a market economy. It is the only one whose output now exceeds the 1989 level. High inflation in 1990 coincided with the removal of subsidies on many goods, and has now come down to around 20 percent and falling.

Poland's population has increased over the last decade, unlike those of some of its neighbours, and is forecast to increase by a further 5.6 percent by 2015. During this period, the proportion of older people will increase, while that of the young will decrease. Ageing populations are common to all of the countries surveyed.

Consumer spending fell in 1989 and 1990, but has now more than caught up with its earlier levels.

3.1.4 Romania

Although Romania's transition to a market economy got off to a very uncertain start, steady progress has been made since 1984. Growth has been steady, though unemployment and inflation are both high.

Romania's economy had suffered years of mismanagement by 1989. The agricultural sector, in particular, had been neglected, although the country is very fertile and could be made rich. The backwardness of Romanian agriculture is indicated by the high proportion of the workforce employed in that sector. Foreign investment so far has been rather low, but it can be expected that capital will eventually become available to Romania's farmers, who will wish to purchase tractors and other types of farm machinery etc.

Romania's population has been virtually static over the last decade, but is projected to fall by 6.68 percent by 2015.

3.1.5 Russian Federation

Russia, too, is faced by a population decline. It is in decline already and is projected to fall a further 3.4 percent by 2015.

Of all the countries surveyed, Russia has suffered the worst crisis, economically and socially, in its transition to a market economy. Output still seems to be declining, although there are indications that this may soon be reversed.

Among the miseries suffered by Russians in recent years, there have been hyperinflation, unemployment, declining life expectancy, plummeting levels of real income, a decaying social security system, corruption, unpaid pensions, and soaring crime and murder rates. Opinion is divided as to whether these are symptoms of gross mismanagement and government incompetence, or the unavoidable costs of a long overdue socio-economic reform that will eventually produce positive results.

There is an element of doubt as to whether Russia's economy will ever 'come right', but if and when it does, there is no question that there will be huge market for the kind of goods and services that have long been taken for granted in the West, but which are still expensive novelties in Russia - everything from electronic goods to cars, housing, cheap but fashionable clothing and inexpensive convenience foods.