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Strong recovery, but inflation a lasting concern

Rapid recoveries are underway across the region and GDP should return close to its pre-pandemic path sooner than in most other EM regions. While the spread of highly transmissible virus strains poses the greatest threat to the near-term outlook, high vaccine coverage means that we do not think it will derail the recovery. The economic rebound is likely to use up spare capacity quickly and keep inflation pressures stronger than in other parts of the EM world. Further interest rate hikes lie in store in Russia, Czechia and Hungary in the coming months, with Poland set to join next year.
William Jackson Chief Emerging Markets Economist
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Emerging Europe Economics Weekly

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23 June 2022

Emerging Europe Economics Update

CEE inflation broadening out

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More from William Jackson

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A closer look at the Delta variant’s threat to recoveries

The spread of the Delta variant of COVID-19 poses a much bigger risk to economic recoveries in emerging markets than in developed markets. India, South Africa, and South East Asia have suffered already or are suffering. And limited vaccine coverage in much of Latin America, other parts of Asia and Africa mean that the threat of future outbreaks will persist. That adds to reasons to expect that GDP will return to its pre-crisis path more slowly than elsewhere.

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Not all doom and gloom

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19 July 2021

Latin America Economics Weekly

Brazil’s tax reform, Chilean primary elections

Proposed changes to Brazil’s income tax setup, which aim to cut corporate tax but only partly offset that with an end to exemptions and the introduction of a levy on dividends, add to the view that fiscal risks will resurface. Elsewhere, on Sunday there will be primary elections in Chile to decide the presidential nominees for the left-wing Apruebo Dignidad and centre-right Chile Vamos coalitions. While there is still a lot of uncertainty at this stage, one common theme is that there seems to be broad political support for keeping fiscal policy loose.

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