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Emerging Europe “is well and truly off the boil”
Emerging Europe is having tough time. Regional year-on-year GDP growth slowed to 1.3% in the fourth quarter, and the MSCI Eastern Europe index slipped by 5% last year.
The Romanian leu has been the worst-performing emerging-market currencythis year, say Yumi Teso andAline Oyamada on Bloomberg. The currency has come under pressure from Romania's widening current-account deficit and concern about new taxes on banks and energy companies that were introduced to address the deficit. Last December, when these measures were first announced, the Bucharest Stock Exchange index tumbled some 12%.
The sinking leu has prompted declines in other regional currencies, reminding investors that emerging Europe has well and truly come off the boil. Regional year-on-year GDP growth slowed to 1.3% in the fourth quarter, reckons Capital Economics. This is partly due to Turkey's recession following its credit bubble. But central Europe (Czech Republic, Poland, Romania, Slovakia and Hungary) is losing momentum too. The trouble is that the region depends on western Europe: almost two thirds of the value of its exports goesto the rest of the EU.
The eurozone's soft patch that began in the late summer has extended over half a year, notes the Financial Times. German manufacturing output has contracted, and the eurozone's economic growth was close to zero at the end of last year.
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Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Capital Economics expects GDP growth of 2.8% and 2.3% in the Czech Republic and Hungary respectively for 2019, down from 4.5% and 4% in 2017. Poland's economy continued to expand at a "robust" 5% year-on-year at the start of the fourth quarter in 2018, however. Its large domestic market means it is less dependent on exports than its neighbours. But Poland's relative dynamism may not temper the regional equity market decline: the MSCI Eastern Europe index slipped by 5% last year.
Join more than 165,000 subscribers and keep yourself informed with the latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Marina Gerner is an award-winning journalist and columnist who has written for the Financial Times, the Times Literary Supplement, the Economist, The Guardian and Standpoint magazine in the UK; the New York Observer in the US; and die Bild and Frankfurter Rundschau in Germany.
Marina is also an adjunct professor at the NYU Stern School of Business at their London campus, and has a PhD from the London School of Economics.
Her first book, The Vagina Business, deals with the potential of “femtech” to transform women’s lives, and will be published by Icon Books in September 2024.
