Emerging European economies are facing a difficult winter due to the energy crisis as well as headwinds from weakening demand for exports and tightening external financing conditions. We expect almost all economies in the region to experience a recession and our 2023 growth forecasts are significantly below the consensus. Central banks in Central Europe are at or close to the end of their tightening cycles but the risks are skewed to further hikes, particularly with inflation set to rise further and currencies to remain under pressure. External positions look particularly vulnerable in Turkey, Hungary and Romania.
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