CEE Quarterly

CEE Quarterly, 01/2012

With much of the developed world in the midst of multi year adjustment process, we enter 2012 facing a lower growth environment, though downward pressure on economic activity arising from bank deleveraging and fiscal tightening will be partially offset by easier monetary policy. The Euro Area retains center stage but the US continues to stuggle with its own debt issues. At the time of writing, the Euro Area was working towards a series of initiatives to bolster fiscal integration and build firewalls. While we expect 2012 to prove a more constructive year for EMU than 2011, market pressures are likely to abate only gradually.

2012 for CEE: Most likely another year of two halves

At least the start of 2012 will be a particularly testing period for the CEE region. The primary uncertainty at this stage stems from EMU via a number of channels. Weaker growth in EMU translates into weaker external demand for CEE exports. To the extent that EMU woes have translated into a significant decline in global risk appetite and slowed inflows to emerging markets as an asset class, CEE has also seen its primary source of capital inflows over recent quarters slow significantly. Lastly the banking sector within EMU must undergo a process of deleveraging which risks translating into an outflow of capital from CEE and a renewed downturn in economic activity.

Length: 64 pages
Published: 4x / year
Language: English

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