Eastern Europe Outlook

Protected by a gradual recovery in the euro zone, 2016 growth forecasts collected in our April survey for Central and Eastern Europe (CEE) were largely stable. Global uncertainties may constrain demand and add to deflation risks, but the threat of a ‘hard landing’ in China appears no longer as high as it was. The outlook for Russia, which remains in recession, has benefited from an upturn in the price of Crude Oil. Hungary could see momentum ease by more than others, following a weak Q1 and the depletion of EU development funds. Its forecasts for inflation have been slashed, due to unexpected deflation in March and announced reductions in VAT. For Romania the immediate outlook for inflation has dimmed, after it fell 3.0% (y-o-y) last month. Public spending increases, though, threaten public finances and may led to higher price risks later on.

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