South Eastern Europe Economic Forecast

Economic Snapshot for South-Eastern Europe

January 14, 2020

Regional economic activity is expected to accelerate notably next year

The ongoing recovery in the Turkish economy should lift regional growth into a notably higher gear this year, while still-cheap credit and a tightening labor market feeding through to wages are expected to buttress activity in the region. However, external headwinds continue to darken the horizon amid lingering trade tensions and weak momentum in the European Union.

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South-Eastern Europe Monetary & Financial Sector News

Regional inflation rose to 6.5% in November from 5.2% in October as price pressures intensified in Turkey owing to a less favorable base effect; inflationary pressures remained relatively muted elsewhere. This year, inflation should soften amid lower oil prices, lower inflation in Turkey and easing domestic demand in many economies.

Regional central banks made little noise in recent weeks, except in Turkey where an improved inflation outlook drove a larger-than-expected rate cut. Relatively muted inflation and a loose stance from the ECB led other regional banks to stand pat. This year, the regional interest rate should fall as Turkey continues to loosen its stance.

Russia’s Central Bank brought its key policy rate down to a six-year low in December amid slowing inflation and frail activity growth. Furthermore, policymakers in Ukraine chopped the key interest rate for the fifth time in 2019 in the same month, although the monetary policy stance remained contractionary. Meanwhile, Kazakhstan’s Central Bank stayed put in December. 

 

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