The economies of Emerging Europe have made a good start to the year and we expect growth to pick up further in the coming quarters. The recovery in the region’s largest economy, Russia, is likely to be stronger than most expect. We think that this will be accompanied by further falls in inflation and – eventually – a substantial drop in interest rates. Elsewhere, we have been upbeat on the prospects for Central Europe for several years and we think the outlook for 2017 remains relatively bright. That said, capacity constraints are likely to emerge by 2018, pushing inflation up and requiring central banks to tighten monetary policy. The exception to this broadly positive story is Turkey, where significant financial vulnerabilities mean the recovery from last year’s post-coup slump will be both fitful and slow-going. Overall, though, we expect regional GDP growth to pick up to 2.3% in 2017 and 2.5% in 2018, from 1.4% in 2016.
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