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