The disappointing batch of August activity data for Central and Eastern Europe suggest that the initial rebound caused by the release of pent-up demand is petering out. The recent escalation of coronavirus outbreaks across the region presents a major downside risk to the near-term recovery. Policymakers in Hungary have responded with an investment-led fiscal package. Meanwhile, developments in Nogorno-Karabakh as well as a recent deterioration in relations with Saudi Arabia add to the sense that Turkey's foreign policy is becoming another key area of concern for the economy.
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