Mind the gap: CEE economies running out of slack

One important consequence of the recent period of strong growth in Central and Eastern Europe is that economies are now running at close to full employment. We expect growth to remain robust over the next 12 months but, as output gaps close, underlying inflation pressures will begin to build. This is likely to prompt central banks in most countries to begin tightening monetary policy over the next year and a half, meaning that by 2018/19 growth starts to slow.