EBRD says emerging Europe growth in mire
The EBRD has negatively revised its growth forecasts for emerging Europe but the CIS is still promising strong economic prospects.
The development bank has knocked more than 1% off of growth expectations for its operating area.
Growth in 2012 is now thought to reach 3.2%, down from the 4.4% growth the bank forecasted three months ago.
Increased eurozone stress, including the assumption of long but ultimately contained eurozone debt problems, are thought to have a more severe impact on emerging Europe than the 2008 crisis.
“The downward revision in 2012 economic forecasts reflect the prospect of a much slower growth in central and south-eastern European countries, which are particularly vulnerable to eurozone stress,” the bank says.
The Baltic and central European countries are set to be heavily hit with their growth rates dropping to just 1.7%, or roughly the same as the IMF’s prediction for the developed and slower to recover economy in the UK.
In particular, the Slovak Republic and Hungary have the highest levels of exposure to the eurozone countries in the region and will take the brunt of the problems if the debt crisis doesn’t resolve soon.
Greece’s near neighbours are also set for a torrid 2012, with Albania, Romania and Serbia picked to perform worse in southeast Europe.
Turkish growth is also set to drop to 2.5% with the EBRD blaming a lack of foreign capital inflows and credit growth alongside weakening external demand.
However, there are some bright spots, particularly in the CIS.
“Growth in Russia and other CIS countries is less affected by events in the eurozone and growth there is expected to still be quite strong,” the bank adds.
“Recovery further east will be much less affected by the eurozone turmoil, as commodity prices are expected to remain elevated due to demand from still-growing emerging markets.”
The run-up to next year’s elections is thought to give Russia a boost and output is thought to reach 4.2% in 2012.
“This development will support expansion even in the non-commodity exporting countries of the CIS, which depend on Russia for exports and remittances,” the bank says.
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