2015: A year of divergence

Economic performances have diverged markedly across Emerging Europe this year, due in large part to the collapse in oil prices. Lower energy costs have kept inflation low in Central and South Eastern Europe, boosting real incomes and allowing monetary policy to stay extremely loose. This supported domestic demand – something confirmed in the latest batch of GDP data for Q3. But the fall in oil prices has clearly taken a heavy toll on Russia, the region’s largest economy. Thankfully, our fears of a full-blown financial crisis, which we warned about a year ago, did not materialise. But the economy has still spent the year in a deep recession and only now are there signs that the slump in activity has started to ease.