Emerging Europe’s economy is likely to contract this year for the first time since 2009, but prospects differ substantially across the region. In Russia, while financial strains have eased, the outlook for the real economy remains bleak. Meanwhile, Turkey has done little to address its economic vulnerabilities and remains the most exposed major emerging market to tighter US monetary policy. We think that growth in both economies is likely to be much weaker than most currently expect. In contrast, Central and South Eastern Europe should perform relatively well. Admittedly, the deepening crisis in Greece and the wider euro-zone has cast a fresh cloud over the outlook. But most countries are now better able to weather the storm than was the case a few years ago. We expect solid, if not spectacular, growth over the coming years.
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