Emerging markets as a whole are likely to outperform the developed world by a wide margin over the next couple of years but Emerging Europe is still facing a twin speed recovery. While some economies will impress, others will be held back by the legacy of last decade’s credit bubble. Turkey and Poland will continue to lead the way, followed by Slovakia and the Czech Republic. Elsewhere, however, vulnerabilities are much greater. Growth in Russia is likely to accelerate over the coming months as the effects of this summer’s drought abate. But prospects further out remain tied to the price of oil, which we expect to fall. Meanwhile, a combination of weak banks, competitiveness problems and hefty external financing requirements mean that the Balkans still face a long slog back to health.