A mixed picture for the prospects of an economic recovery emerging Europe, according to Monday’s forecast from the European Bank of Reconstruction and Development.

The EBRD found that the more advanced countries of central Europe will probably do a bit better than expected next year, while the rest of the post-communist region is sputtering.

In the EBRD’s regional outlook for post-communist countries of central and eastern Europe, as well as Turkey and north Africa, the development bank revised down its overall growth prospect for 2014, largely due to a lacklustre performance by Russia.

The forecast for 2013 has been cut to 2 per cent from 2.2 per cent predicted in May, while the outlook for 2014 has been pared back to 2.8 per cent from 3.2 per cent in May.

Eric Berglof, the bank’s chief economist, wrote:

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 problem in Russia is due to a drop in commodities prices, especially oil, the country’s leading export. Growth in Russia next year is now expected to come in at 2.5 per cent instead of the 3 per cent predicted by the bank in May. More from the bank:

Investment has remained subdued, even though the economy has been operating closer to capacity limits and unemployment remains low. At the same time, commodity prices no longer provide a boost for the economy.

There is better news for the bigger economies of central Europe, which are more closely tied to the eurozone.

Poland and Hungary, two of central Europe’s largest economies, are now expected to grow a bit faster in 2014 than the EBRD had predicted six months ago. Poland is now pegged to grow at 2.3 per cent compared to May’s forecast of 2 per cent, while Hungary is expected to grow by 1.2 per cent instead of 0.9 per cent.

Lithuania also looks a little stronger. Lithuania together with Latvia are expected to be central Europe’s growth leaders, expanding by more than 3 per cent, although both countries’ economies have still not caught up to pre-crisis levels.

From the report:

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.

Related reading:
Poland’s recovery: still on track?
, beyondbrics
Confidence returns to maturing central and eastern European economies
, FT
CEE: evidence of a rebound as growth forecasts upped
, bb

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