Page 22 - bne IntelliNews Country Report: Russia Dec17

in 2017 and 2018, respectively,” the development bank predicted, giving a forecast that is below those of some of the other International Financial Institutions (IFIs) and local investment banks.
“The increase in the oil price – compared with 2016 – has been a positive factor for Russia, and also for other commodity exporters and countries in Central Asia and Eastern Europe and the Caucasus that rely on Russia for remittance flows or as a destination for their exports,” the EBRD said. The gap in growth rates between the east and west of the EBRD region was now expected to narrow further, it added.
Central Europe
After a slowdown in 2016 linked to lower investment levels, growth in Central Europe and the Baltic states is expected to accelerate to close to 4% in 2017, before moderating to around 3.5% in 2018, the EBRD report found.
Growth in Central Europe has been so fast that several countries are starting to run up against structural constraints, with rising wage costs and tightening labour markets being the most significant amongst them. Wages have grown at such a quick rate that some international investors are beginning to talk about going home as the competitive advantages these countries used to offer are being eaten away and unions are becoming more demanding when it comes to workers' rights and privileges. At the same time the appeal of the lower cost Southern European countries is increasing, but the low levels of productivity and poor infrastructure mean investors are not ready to make the switch as yet.
In Poland, where growth is seen rising to 4.1% this year, the pace will slow to 3.4% as the one-off impact of increased social payments fades. The near-term economic outlook has improved in Hungary on the back of cuts in the rates of corporate income tax and social security contributions as well as increased minimum wages. And labour shortages and the rising cost of labour in Czechia and Slovakia will also undermine growth in these countries in the medium
22 RUSSIA Country Report December 2017 www.intellinews.com