Turkey leading the recovery, Russia lagging behind

The latest activity data from Emerging Europe have been something of a mixed bag. Turkey is leading the recovery as a rebound in credit growth has fuelled domestic demand. Here, we think GDP growth accelerated to around 2.5% y/y in the first few months of this year, up from around 1.5% y/y at the end of 2012. By contrast, the Russian economy slowed further at the start of 2013 to around 1% y/y from 2% y/y in Q4. Meanwhile, in the highly open economies of Central Europe, the latest data suggest that the slowdown has bottomed out. But equally, there hasn’t been much sign yet of a recovery. The one crumb of comfort is that inflation in Central Europe has fallen sharply over the past couple of months which could provide a boost to consumer spending.