Growth in Europe and Central Asia is estimated to have slowed to 1.6% in 2019, a four-year low, partly reflecting a sharp weakening of activity in Turkey. Trade continues to weaken across the region, as goods trade volumes have slowed in parallel with sluggish activity in the Euro Area, the region’s largest export destination.
Monetary policy tightening has paused in the region and fiscal policy has loosened in 2019. Inflation has been trending up in some of the larger economies in the region since the start of the year, notably in Hungary, Poland, and Russia, driven in part by rising oil prices.
Industrial activity in Russia slowed at the start of 2019, as compliance with agreed-upon oil production cuts took effect. Russia is estimated to slow to 1.2% growth this year. Turkey, which experienced sharp declines in investment and private consumption from acute financial pressure in the second half of last year, is projected to contract by 1% in 2019.
Poland is expected to moderate to 4% growth this year even as subdued inflation and interest rates enable authorities to undertake accommodative monetary and fiscal policies.
Regional growth is expected to firm to 2.7% in 2020 as Turkey recovers from a sharp growth slowdown. Excluding Turkey, regional growth is expected to moderate to 2.6%, with modest growth in domestic demand and a small drag from net exports.
In Central Europe, fiscal stimulus and the resulting boost to private consumption will begin to fade in some of the subregion’s largest economies, including Hungary, Poland, and Romania, by 2020. The subregion is expected to slow to 3.3% next year from 3.7% in 2019. Growth is expected to modestly recover to 2.7% in Eastern Europe and moderate to 4% in Central Asia in 2020.
Read More: Global Economic Prospects - June 4, 2019 (PDF)