South Eastern Europe Economic Forecast

Economic Snapshot for South-Eastern Europe

June 9, 2020

Regional GDP is expected to contract notably this year, suppressed by the fallout from the Covid-19 pandemic. The health crisis is forecast to weigh heavily on private consumption, trade and tourism. While the gradual lifting of lockdown measures should provide some respite, fiscal space to spur economic activity varies greatly across the region.

SEE Monetary & Financial Sector News

Weakened aggregate demand and low global oil prices have weighed on inflationary pressures in recent weeks, with regional inflation easing to 5.9% in April from March’s revised 6.8%. This year, regional inflation is projected to ease markedly compared to last year, as the pandemic weighs on activity, while low oil prices provide further downward pressure on prices.

Regional monetary policy continued to be loosened in recent weeks, with the Turkish, North Macedonian and Romanian central banks all cutting rates. Looking ahead, the regional interest rate is forecast to be lowered further this year as monetary authorities look to spur economic activity in the wake of the Covid-19 pandemic.

In recent weeks, the Turkish lira strengthened against the USD due to currency swaps, while the euro also gained ground against the greenback. Against the EUR, the Albanian lek and the Romanian leu were down slightly, but the Serbian dinar was unchanged. This year, the regional exchange rate will depreciate on broad-based currency weakness.

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