We remain upbeat on the growth outlook for Emerging Europe. But this is largely due to our positive assessment of the prospects for Russia and to a lesser extent Turkey and Poland, which between them account for around 75% of the region’s output. Elsewhere, we have become increasingly concerned about overheated and unbalanced growth in the Baltics and Balkans. While our central forecast continues to be for a ‘soft-landing’ in these countries, a further dip in global risk appetite could prompt a disorderly devaluation of currency pegs and subsequent recession. Latvia remains the most at risk but contagion could spread across the Baltics and to Bulgaria and Romania.
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