Recent activity data suggest that recoveries in Emerging Europe’s two largest economies – Russia and Turkey – have been disappointing. In Russia, where the economy expanded by a meagre 0.5% y/y in Q1, growth hasn’t been much quicker in Q2. And after exiting recession in the first quarter, there’s a good chance that Turkey’s economy has contracted again due to the previous tightening of financial conditions and fading fiscal stimulus. However, it’s a completely different story in Central and Eastern Europe, where GDP growth looks to have rattled along at 5-6% y/y in most of the region’s major economies. Extremely strong domestic demand is continuing to offset weakness in key euro-zone trading partners.
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