Emerging Europe remains a region of two halves. Its two largest economies – Russia and Turkey – will continue to struggle over the coming years as cyclical downturns compound long-standing structural problems. Our forecasts for both economies are below consensus. In contrast, we’re relatively upbeat on the prospects for Central and South Eastern Europe. Exports in these economies should be supported by a gradual recovery in Germany (the region’s largest trade partner), while improving labour markets, low commodity prices, and accommodative monetary and fiscal policy will support domestic demand. The sheer size of Russia and Turkey mean that aggregate growth in Emerging Europe will remain low in 2015-17 but some economies, including Poland and the Czech Republic, will be rare bright spots in the emerging world over the coming years.
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