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EBRD: Serbia and Romania are pushing up the growth average in southern-eastern Europe

Growth across the EBRD region is expected to pick up in 2016 and 2017 despite continued major risks, according to the latest economic forecasts published by EBRD.

2016-11-07 09:40:53

The EBRD region, which stretches from southern and eastern Mediterranean countries to eastern Europe and Central Asia, is forecast to grow, on average, at 1.6 per cent this year (an upward revision of 0.2 percentage points since the previous EBRD forecast in May) and 2.5 per cent next year, compared with 0.5 per cent growth in 2015.

South-eastern Europe as a whole is on the rise. Greece is turning around thanks to a good season for tourism, and the return of business confidence. Serbia and Romania are pushing up the growth average, according to EBRD. Cyprus is continuing the upward trend of 2015. FYR Macedonia has been negatively affected by a political crisis.

Russia and Greece are emerging from recession. Both economies shrank in the first half of the year, so there is still no growth in average numbers for 2016, but estimates indicate that Greece has just passed the turning point and Russia is close to it. Russia's economy will still contract on average this year but gradual recovery is expected to take hold in the second half of 2016 and continue into 2017. Greece will move from last year's recession to zero growth for 2016, and then to positive growth in 2017.

Turkey will grow at a slower pace in 2016 than in 2015. After a turbulent summer, which saw ratings downgrades and a drop in equity markets after the failed coup, a pick-up in consumption and tourism (provided that security concerns subside) is expected to prop up growth, but rising oil prices and regional tensions remain a risk.

Ukraine and Moldova are back in the black. Ukraine returned to growth in the first half of 2016, after the economy shrank by a total of 16 per cent in the previous two years. Non-performing loans (NPLs) remain an acute problem in Ukraine. Moldova's modest growth is backed by household consumption.

Recessions in Azerbaijan, hit by oil prices, and Belarus, which is suffering from the recession in Russia for the second year, will mean an average contraction in eastern Europe and the Caucasus in 2016. But the pace of decline is slowing, and national currencies have somewhat stabilised. Both Azerbaijan and Belarus are expected to return to growth in 2017.

Central Europe and the Baltic states see continuing but slowing growth and a drop in investment. The region benefits most from lower energy prices and the accommodative monetary policies of the eurozone.

The report sees a mixed picture in Russia. Some sectors like agribusiness and chemicals have benefited from currency depreciation but the long-term import substitution effects are uncertain. Capital outflows are subsiding and international borrowing is on the rise. But domestic demand and corporate investments continued contracting in 2016. Monetary policy is focusing on combating inflation, and fiscal policy on containing the budget deficit.



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