The outlook for Emerging Europe has deteriorated in recent months. Weaker growth in the euro-zone will hit manufacturers, while consumers are facing twin headwinds of higher inflation and tighter lending conditions. We still expect Slovakia, Poland and the Czech Republic to undergo a relatively gentle slowdown, but large macroeconomic imbalances mean that Turkey, Ukraine, Romania and Bulgaria could be in for a sharper adjustment. Meanwhile, the recovery in Hungary will be slower than even we had initially expected. Finally, the Russian economy is still showing signs of overheating and policymakers must act now in order to avoid a harder landing in the medium-term.