CEE Economies to Strengthen in 2011-12, Says SEB

Economic conditions in central and eastern Europe (CEE) will strengthen in 2011-2012, although fiscal policies will be tightened moderately in many countries and global growth will level out, according to SEB’s latest eastern European outlook report. The report predicts that strong,competitive exports will remain a key driving force this year. Meanwhile consumption and capital spending are awakening from their crisis period hibernation and will help sustain good gross domestic product (GDP) growth. Eastern Europe was the region of the world hardest hit by the global credit crisis, mainly due to relatively large borrowing in foreign currencies.

SEB predicts that accelerating inflation due to sharply higher global energy and food prices will partly undermine household purchasing power this year. Underlying inflation pressure is low but is gradually increasing. Looking ahead, the commodity price upturn will moderate. The increase in broad inflation measures will culminate this year, except that in Estonia and Lithuania inflation will continue to accelerate in 2012.

The report adds that large public budget deficits in the wake of the crisis will shrink to more moderate levels in most countries. Estonia’s deficit will rise slightly from a low level. Public sector debts will continue to grow somewhat; they are low or moderate, compared to many western countries.


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