IMF Cuts Eastern European Growth Forecast on Euro Debt-Crisis Contagion
The International Monetary Fund cut its growth forecast for central and eastern Europe, which as other regions in the world is threatened by “strains in the euro area,” the Washington-based lender said.
Central and eastern European economies will expand a combined 1.1 percent this year, down 1.6 percentage points from a September forecast, the IMF predicted today in an update to its semi-annual World Economic Outlook. The revision mirrors a 1.6 percentage-point cut in the estimate for the euro region, which the IMF forecasts will contract 0.5 percent.
The unresolved debt crisis in the euro region has infected emerging economies in the continent’s east that rely on western Europe as an export market and source of investment. Western European banks, which control about three-quarters of the region’s banking industry, pose another threat as they are forced by regulators to recapitalize themselves, often by shedding assets, to guard against the effect of the euro crisis.
“The adverse spillover effects are expected to be largest for central and eastern Europe, given the region’s strong trade and financial linkages with the euro area economies,” the IMF said in the report.
Growth in the region, which includes Poland and Hungary, will slow from an estimated 5.1 percent last year, the IMF said. The economies will grow 2.4 percent in 2013, the IMF said, reducing its September forecast by 1.1 percentage points.
The IMF includes Turkey in its definition of central and eastern Europe, excluding Russia and former Soviet countries.
Russia will expand 3.3 percent this year and 3.5 percent in 2013, the IMF said, cutting its previous estimates by 0.8 percentage point and 0.5 percentage point. The Commonwealth of Independent States will expand 3.7 percent this year and 3.8 percent in 2013, according to the IMF.
To contact the reporters on this story: Agnes Lovasz in London at alovasz@bloomberg.net;
To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net
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