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Central Europe
April 21, 2017 www.intellinews.com I Page 10
Global buoyancy could struggle to lift Visegrad and Baltics, suggests IMF
bne IntelliNews
The International Monetary Fund maintained its forecast that economic growth should accelerate in the Visegrad and Baltic regions in the latest edition of its “World Economic Outlook” released on April 18. However, the international financial institution appears wary of suggesting that the strengthening global conditions will boost the economies significantly.
With buoyant financial markets and a long-awaited cyclical recovery in manufacturing and trade un- derway, world growth is projected to rise from 3.1% in 2016 to 3.5% in 2017 and 3.6% in 2018, slightly above its October 2016 forecast, the IMF said.
However, it also warned that “binding structural impediments continue to hold back a stronger recovery, and the balance of risks remains tilted to the downside, especially over the medium term”. In particular, the IMF analysts flagged up low pro- ductivity growth and high income inequality.
Those are common criticisms thrown at the coun- tries of Central and Eastern Europe, and have never been more pertinent as the region faces growing labour shortages. The IMF noted that such structural issues will likely pressure “forward- looking policies”. That appears to refer not only to the rise of populist policy, but also the drag that the political trend exerts on structural reform.
Still, the uplift in activity in the EU and other ‘ad- vanced economies’ in the fourth quarter of 2016 is noted, and forecast to persist. Given the strong links, that should help support Visegrad and the Baltics. “In line with stronger-than-expected momentum in the second half of 2016, the fore- cast envisages a stronger rebound in advanced
economies,” the report read. “The outlook has... improved for Europe... based on a cyclical recovery in global manufacturing and trade.”
The outlook for economic growth in the Eurozone in 2017 was raised by 0.1pp compared with the last WEO released in October to 1.7%. The 2018 prediction remains at 1.6%. Similar dynamics are seen in the IMF’s expectations for Germany, by far the largest source of export demand for the Visegrad region. However, across the Baltic and Visegrad regions, only the forecasts for the Czech Republic and Hungary have benefitted from the uplift in EU activity in late 2016 and early 2017.
The Hungarian economy is now forecast to expand 2.9% in 2017, clearly faster than 2% seen in 2016 and 2.5% predicted in October. Czechia’s GDP is projected to grow 2.8%, a significant gain over the 2.4% achieved in 2016, and rise of 0.1pp on the forecast in the previous outlook.
Growth across the Baltic states is expected to pick up speed this year compared to 2016, the IMF notes. Latvia will lead the region with GDP projected to expand by 3%, followed by Lithuania at 2.8%, and Estonia at 2.5%. However, the forecasts for Latvia and Lithuania have been pared down from 3% and 3.4%, respectively, since the October outlook.
The IMF puts the Polish growth at 3.4% in 2017, unchanged from the previous forecast. Poland grew 2.8% in 2016.
Slovakia’s GDP is expected to gain 3.3% this year in a forecast that is also unmoved from the previ- ous report. The country's economy expanded 3.3% in 2016.