Income convergence in the Western Balkans has stalled, according to the IMF’s new report, Regional Economic Outlook: Europe Hitting Its Stride. Measured in purchasing-power-parity terms, income levels in the region today are less than 30 per cent what they are in the euro area.
Growth in Emerging Europe increased to around 3 per cent in the first half of 2017, up from 1.5 per cent in 2016, according to the latest IMF Regional Economic Outlook: Europe Hitting Its Stride report. The drivers of the growth are recession in Russia, increasing private consumption, low unemployment and labour shortages which have pushed up wages.
A new report published by HSBC on November 14 shows growth across emerging Europe exceeding expectations in the third quarter of 2017. Romania (8.8 per cent), Poland (4.7 per cent) and the Czech Republic (5 per cent) all beat previous forecasts, while Hungarian economic growth (3.8 per cent) also picked up pace, but came in a touch below consensus expectations.
The European Commission’s Autumn Economic Forecast, published on November 9, sees growth continuing across those emerging European states which form part of the EU, although the pace of that growth is expected to slow somewhat over the next two years. Almost across the board, private consumer spending is the main driver of growth.
The Czech capital Prague is the 5th most popular European city for tourists, and is on course to welcome more than 8.5 million visitors in 2017, a 4.5 per cent increase on 2016. The figures were presented at the World Travel Market in November by Euromonitor International, which has been studying travel trends across the globe for the past decade.
Business and opposition leaders, trade unionists, small firms and even local councils across Romania have condemned an emergency ordinance (OUG) passed by the country’s government on November 8 which transfers the responsibility for paying social contributions from employers to employees. It is claimed that the changes, which take effect from January 1, 2018, will lead to additional costs for business and may mean that workers take home less money each month. Some companies may even be forced to lay workers off. The Romanian currency, the leu, moved past the psychologically crucial 4.6 lei to the euro barrier even before the OUG had been formally approved, hitting its lowest level for over five years.
All 23 economies of emerging Europe are set to record positive growth in 2018, led by Georgia, whose GDP is seen as growing by more than 4.2 per cent. Even Azerbaijan, whose economy has contracted for the past two years, is seen as returning to modest positive growth in 2018. The regional outlook is stable, but a couple of places, notably Romania, are giving cause for concern.
The finance ministers of Estonia, Latvia and Lithuania announced on November 6 that they had agreed to create a pan-Baltic capital market to strengthen their economies and stimulate investment. Toomas Tõniste (Estonia), Dana Reizniece-Ozola (Latvia) and Vilius Šapoka (Lithuania) signed a Memorandum of Understanding in Brussels in which the three countries agreed to harmonise capital market regulations and dismantle investment barriers. All three Baltic States suffer from a number of constraints caused by the relatively small size of their markets: the agreement should help them overcome such limitations.
The Czech National Bank (CNB) raised its main interest rate by 25 basis points to 0.50 per cent in early November. The bank had also increased the rate in August, in doing so becoming Europe’s first monetary authority to embark on a tightening cycle.
Less than six years ago, Warsaw had only one airport — Okęcie — which has recently been expanded and in 2016 handled a record number of 12.8 million passengers. Today, there is Warsaw Modlin, located 40 kilometres north of Poland’s capital, served mainly by Ryanair flights, and Radom, about 100 kilometres south of the city, which opened three years ago at the cost of 120 million złotys (27.8 million euros) and recently lost its only regular carrier. Now the government is planning another airport in Stanisławów, some 45 kilometres west of Warsaw. The cost of the investment is estimated at 20 billion złotys (4.6 billion euros) and the first plane is scheduled to take off in mid-2027.
The International Monetary Fund (IMF) has urged Croatia to accelerate the pace of structural reforms in order to improve competitiveness and mid-term growth prospects.
“Croatia’s convergence process has slowed down compared to its peers,” Elisabetta Capannelli, World Bank country manager for Croatia and Slovenia tells Emerging Europe. “Key reforms include those that would help create a favourable and predictable business environment and overall reduce the presence of the state in the economy, making it much more effective when companies should remain in public hands,” Elisabetta Capannelli, World Bank Country Manager for Croatia and Slovenia tells Emerging Europe.
Limited access to quality education, jobs and services, and the need for better cooperation between regional and central government are just two of the reasons that the Riga region underperformed in the latest survey of the Latvian economy carried out by the Organisation for Economic Cooperation and Development (OECD).