EBRD forecasts eastern European growth to accelerate in 2017

Growth will pick up across eastern Europe and former Soviet republics in 2017 as oil and commodity prices stabilise – but will fall in Turkey due to security concerns and geopolitical risks, according to the latest biannual forecasts from the European Bank for Reconstruction and Development.

The key multilateral lender to “emerging” Europe forecasts that growth across its 36 countries of operation will accelerate to 2.4 per cent this year and 2.8 per cent in 2018, from 1.8 per cent in 2016.

Sergei Guriev, the EBRD’s chief economist, noted that still put the region’s growth below that of the world economy. Be he said the projections showed the region was overcoming the legacy of the 2009 global recession, which hit eastern Europe harder than most other regions.

“Overall the news is good, growth is faster. Despite all the risks, all the global challenges, our economies are returning to faster growth,” he said. “The challenge of policy uncertainty in the US and the risks of a strong dollar” that were expected when Donald Trump was elected US president last November “in general have not materialised”, he added.

The Russian economy is forecast to return to moderate growth of 1.2 per cent this year and 1.4 per cent in 2018, after a cumulative decline of 3 per cent in 2015 and 2016. But Mr Guriev said Russian interest rates could fall more quickly than expected with a stronger rouble helping to curb inflation.

But weak tourist receipts, partly due to security concerns and geopolitical risks, are clouding the outlook in the southern and eastern Mediterranean, as well as Turkey.

The bank sees Turkish growth declining from 2.9 per cent last year to only 2.6 per cent in 2017, as a result of increased capital outflows and a weaker investment outlook because of political uncertainty as president Recep Tayyip Erdogan seeks to strengthen his power through constitutional changes.

Only two countries – Belarus and Azerbaijan – are forecast to experience recession this year, before starting to grow again in 2018. Ukraine’s growth is projected to slow to 2 per cent this year from 2.3 per cent in 2016, but recover to 3 per cent next year.

“These projections are subject to major risks related to geopolitical tensions in and around the region,” the EBRD cautioned. “In addition, the global environment is characterised by increased political uncertainty and a number of conundrums – notably the substantial improvement in economic confidence indicators that have not been reflected in hard economic data.”