Sentiment picks up but growth still weak

The outlook for Emerging Europe has brightened considerably at the start of the year. Equities have rallied while the latest survey data from key euro-zone export markets have picked up markedly. However, so far at least, there has been little evidence to justify the optimism within Emerging Europe itself. Indeed, the latest hard data suggest that activity in the region slowed sharply at the end of 2012. Even in Poland and Russia, which had until recently been the region’s star performers, we think GDP grew by a disappointing 0.8% y/y and 2.0% y/y respectively in the final quarter of last year. All told, we think that growth in the region as a whole probably stood at 1.0% y/y in Q4, down from 1.5% y/y in Q3.