Regional growth to strengthen as Russia exits recession

Growth in Emerging Europe is set to strengthen over the next few quarters, helped in part by the fact that the drag from Russia will ease as it exits recession. However, while the acute stage of Russia’s crisis has passed, the recovery over 2016-17 will be weak by past standards. Instead, we expect the economies of Central and South Eastern Europe to remain the region’s best performers. Admittedly, growth in these countries will slow to more normal rates over the course of the next year as recent tailwinds – notably from lower oil prices – fade. But even so, we expect these economies to grow by 3% or so, which would be good by the standards of the rest of Europe. One common theme across the region is that inflation pressures will remain low, allowing central banks either to maintain extremely loose policies or, in some cases, cut interest rates further.