Page 5 - bne IntelliNews Georgia country report November 2017
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November 11, 2017 www.intellinews.com I Page 5
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 corpo- rate 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 term. All these nations are reaching a tipping point where they will have to
reinvest themselves, ditching the low-cost, export- orientated models they have followed so far.
Southeastern Europe
In southeastern Europe, average growth is also expected to accelerate, reaching 3.6% in 2017 before moderating to 3.3% in 2018. The Greek economy has returned to growth in the first half of the year amid progress in reforms and rising confidence.
Growth in Eastern Europe and the Caucasus as a whole is expected to pick up from near-zero to close to 1.5% in 2017 as headwinds from low commodity prices and the earlier recession in Russia subside, although Azerbaijan’s economy is projected to remain in recession. A gradual recovery in the region is set to continue in 2018.
Growth in Turkey is projected to accelerate to 5.1% in 2017 on the back of government stimuli before slow- ing to 3.5% in 2018 as the fiscal impact wears off.
Economies in the southern and eastern Mediter- ranean (SEMED) region are expected to show growth of 3.8% in 2017 and 4% in 2018, supported by reform implementation and a continued recov- ery in the tourism sector, as well as export re- bounds in Egypt and Jordan.
Morocco is the only country in the SEMED region that is expected to see a slowdown in growth during 2018, as the base effect from the agricultural re- bound in 2017 (after a very poor 2016) is removed.