Economic forecasts of EBRD for 2018 – recovery in Ukraine continues

The EBRD latest report on Regional Economic Prospects forecasts the average growth of 3.3 per cent in 2018, which is 0.3 percentage points higher from the forecast as of last November. It is expected the growth will reach 3.2 per cent for 2019.

Eastern European Countries continues recovery in disposable incomes is contributing to regional growth.  Growth in eastern Europe and the Caucasus is seen accelerating from 2.3 per cent in 2017 to 3 percent in 2018 and 3.3 per cent in 2019, mainly reflecting continued recovery in Ukraine. Growth in Azerbaijan is also expected to pick up gradually as oil output stabilizes.

Source: National statistical authorities and central banks, EBRD calculations. Real wage growth in Georgia is an estimate.

Investment growth is backed by greater disbursement of EU structural funds to central and south-eastern Europe. Gross inward FDI in a typical economy amounted to 2.3% of GDP, in line with the 2012-16 average.

Source: EBRD Report based on National Authorities via CEIC, World Bank and additional calculations

Emerging Markets’ yields little affected by stock market correction of February 2018. The search for yield resulted in many weaker-rated borrowers in emerging markets globally enjoying access to funding on unprecedentedly favourable terms.

Source: EBRD Regional Economic Prospects Report, based on Bloomberg

Regions’ overall corporate debt increased to 61% of GDP in 2018 from 42% in 2007, largely external and/or forex. A source of risk if case global financial conditions start tightening.

Source: National authorities via CEIC; IMF, WB, BIS, OECD via Joint External Debt Hub. Domestic debt numbers are based on bank balance sheet data from national sources. External Debt data consists of external loans from BIS reporting banks, as well international debt securities.

Most countries in the region have significant buffers in case of a major reversal in capital flows to EMs. Pockets of risk: Reserve coverage of one-year gross external financing needs is relatively low in a number of countries, including Belarus, Georgia, Mongolia, Tajikistan, Tunisia, Turkey and Ukraine.

Source: World Bank WDI and author’s calculation. External financing requirements calculated as the sum of current account deficits and short-term external debt. External 18 financing requirements calculated as the sum of current account deficits and short-term external debt. Euro area economies not shown

Stronger wage growth supported growth, reflecting tighter labour markets. The highest wage growth has been reflected in Ukraine, Turkey, Belarus and Romania.

Source: National authorities via CEIC, Thomson Reuters and authors’ calculations. Ukraine had 26% year-on-year wage increase, not included due to formatting.

With the reference to Anthony William and EBRD Report


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