Ending the year with a whimper

Most economies in Emerging Europe enjoyed a strong first half of 2016, but regional growth has slowed sharply over the second half of the year. Q3 GDP data showed that the Turkish economy suffered an outright fall in output, due in large part to the impact of July’s coup attempt, while growth in Central Europe weakened by more than we and most others had expected. Survey data have improved a little in Q4, yet the hard activity data available so far generally point to further weakness. We do expect regional GDP growth to strengthen in 2017, not least because the largest economy in Emerging Europe, Russia, will probably exit recession in the next few quarters. But the recovery will be weaker than most expect. Our growth forecasts lie below the consensus across the region, and far below in the case of Turkey.