Signs of resilience, but recession still likely

Growing domestic and external headwinds have taken a bigger toll on the region’s economies in recent months, with growth slowing sharply in Turkey and Israel in Q3 and GDP contracting outright in Czechia, Hungary and Latvia. Admittedly, there have been some signs of resilience in the latest hard activity data (particularly in industry) which provides encouragement that economies may hold up better than we had initially feared. Even so, surveys for Q4 remain weak and we still expect most economies in the region to enter recession this winter as the impact of high inflation, past monetary tightening and weakening external demand take their toll.