12.11.2013
Since our forecast in May 2013, the recovery in advanced economies, including the Eurozone, has taken hold, though growth in emerging markets has slowed. On balance, the outlook for growth in the transition region has weakened further. The region is now expected to grow at 2.0 per cent in 2013 compared with 2.7 per cent in 2012. The recovery in 2014 is also expected to be more modest than the May forecast suggested, with growth picking up only to 2.8 per cent. The current slowdown in the region is only partly cyclical. Many of its causes are structural, reflecting lower growth potential, limited sources of finance for investment and unfinished structural reforms, as highlighted in the forthcoming EBRD Transition Report 2013 entitled “Stuck in Transition?”
Growth across the transition region as a whole continued decelerating amidst weaker performance of emerging markets globally (Chart 1) and despite a moderately stronger performance of the advanced economies. This primarily reflects deceleration in Russia, Eastern Europe and Caucasus (EEC) and South-eastern Mediterranean (SEMED). At the same time, in regions with closest links to the Eurozone -- Central Europe and the Baltics (CEB) and south-eastern Europe (SEE) -- growth picked up in the second quarter of the year, as the Eurozone finally showed signs of exiting recession. Preliminary data suggest that the output in the single currency area expanded by 0.3 per cent in the second quarter (1.3 per cent in annualised terms). A pickup in Hungary brought an end to a recession that lasted through 2012, and Lithuania and Latvia are set to remain growth leaders in Europe as a whole. Elsewhere, growth remains modest and the recession has deepened further in Slovenia, where domestic demand continues to be constrained by corporate and banking sector deleveraging. Unemployment has remained high across the region.
