Turning a corner, but a difficult road ahead

Downturns in activity are bottoming out in Emerging Europe, current account deficits are narrowing and disinflation has taken hold across the region. But the road ahead still looks challenging. We expect GDP growth to disappoint expectations in most countries this year and inflation is likely to be more stubborn than most expect. In general, we think that interest rates will be cut by less than most anticipate by the end of 2024. Russia’s economy is holding up well despite the war, but tighter sanctions and lower energy prices present downside risks. And, while optimism about a shift to orthodox policymaking has taken hold in Turkey, we are sceptical about how long this will last.