Economic slowdown spreads to strongest performers

The slowdown across Emerging Europe has intensified in recent months. We reckon that the region’s economy expanded at an annual pace of around 1.5-2.0% in Q3, down from 2.5% in Q2 and an average of 4.8% in 2011. Worryingly, the slowdown appears to have spread to what were the region’s strongest economies, with growth in Russia and Poland slowing sharply in the third quarter. The ongoing problems in the euro-zone are partly to blame, but local factors (including fiscal austerity in a number of countries) are also at play. Looking ahead, there doesn’t appear to be any prospect of a quick rebound. Indeed, leading indicators suggest that Q4 could be even worse. Needless to say, this all supports our below-consensus growth forecasts.