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Strong growth in CEE starts to raise eyebrows

Recently-released figures showed that GDP growth in Central and Eastern Europe (CEE) picked up to a post-financial crisis high of 5.3% y/y in Q3. Growth strengthened in most countries in the region – the exceptions being the relatively small economies of Slovakia and Lithuania. Romania was, once again, the best-performer, expanding by an eye-watering 8.8% y/y. However, the rapid pace of growth in the region is starting to raise concerns about overheating. And, while our central view is that monetary policy will be tightened next year (and by more than most expect), there is a real risk that policy is kept too loose for too long which could result in a build-up of macroeconomic imbalances. We will be looking at this in more detail in forthcoming publications.

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