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Eastern Europe: Real GDP Growth forecasts for 2016

February 1, 2016

 

Eastern Europe's expected real GDP growth may reach average 2.3 per cent in 2016. Not all the countries within the group are growing evenly, in fact the growth varies heavily from the lowest -2.2 Belarus to 4.9 Montenegro.

 

The top 3 performers are Montenegro 4.9, Romania 3.9 and Slovakia 3.6. Two economies are set to decline in 2016: Russia -1.0 and Belarus -2,2.

 

The driver behind the growth of EU member Eastern European states is overall stabilization of Euro area after the 2008 crisis and debt crunch.

 

Non-EU member Southeastern European countries leveraging the stable Euro area and public investments in infrastructure financed by foreign sources.

Transcaucasia is hit by Oil prices shock, main receiver is Azerbaijan 2.5 and

 

Russian economic difficulties challenge mainly Armenia 2.2, while Georgia remains the strongest growing market in that region with 3.0 per cent expecting growth in 2016.

 

Russia and CIS (Western part) grow very small in 2016 if any and Eurasian Customs Union will decrease in its output by -0.3 per cent. The reason behind is oil price shock and the sanctions against Russia.

Georgia's economic forecast 3.0 per cent is better compare to Eastern European group 2.3, however it is lower compare to global average 3.4.

Higher Global Growth is driven by the Emerging Markets and Developing Economies 4.7 which is lead by India, ASEAN and China.

To summarize there is a strong base for a growth in Eastern Europe, that is Euro area general stabilization, it is obvious investment friendly and industrialized economies are growing better. The shocks are coming from Russia, however its radiation is mostly limited with CIS group, oil prices shock hurts however non-oil dependent economies are far less affected.

 

To improve the growth possibilities the Georgian Government shall:

  • Leverage the preferable macro position in region to attract the investments;

  • Keep competitive in terms of investment friendly business environment;

  • Diversify its foreign economic relations more towards Eastern and Southeastern Asia;

  • Keep integration process with Europe;

  • Engage more into the regional projects;

  • Leverage the public investments.

 

Source: various IMF databases with the most recent updates of January. 2016.

 

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