End-of-year balance of payments data for 2011 suggest that remittances from Albanian migrants (mostly located in crisis-shattered Greece and Italy) did not drop as much as expected; on the contrary, they increased slightly. The inflow of remittances thus accounted for about 8% of GDP, almost as much as the inflow of FDI. Given the positive developments in potentially weak areas of the Albanian economy, we have revised upwards our previous GDP growth rate estimate for 2011 by one percentage point to 2.9% and our GDP growth rate forecast for 2012 by 10 basis points to 2.3%....more

Due to its specific export specialisation, the economy of Bosnia and Herzegovina is hit hard by the adverse international business climate. The current account gap has widened, and a widening gap between government revenues and expenditures is causing headache. It would be difficult to justify expectations of a quick recovery....more

Bulgaria’s economy kept losing steam in the first quarter of 2012 against the backdrop of weakening exports and weak domestic demand. The fiscal stance remains under the reigns of an austerity strive in the absence of policy creativity. There is little chance of reversing this situation in the short run so current expectations are that the economy is likely to stagnate in 2012....more

The Czech economy is entering a recession whose depth and duration will partly depend on the euro area developments. The recession may be moderated by the Czech currency’s relative weakness. While the financial conditions and the monetary policy are essentially conducive to growth, the untimely – and actually unnecessary – fiscal consolidation implemented is the primary determinant of the overall poor performance of the real economy. The prospects for 2013 and 2014 may look better because by that time the fiscal consolidation will be either successfully completed – or discontinued....more

Dwindling external demand remarkably reduces the Estonian growth expectations for 2012. However, the strong increase in employment of 2011 brings about real wage growth and hitherto domestic demand to back the business cycle. Thus, the current account turns into deficit again. An upswing of GDP growth in 2013 to 2014 is likely but depends strongly upon a revival in the Scandinavian region....more

Croatia is slipping again into recession in 2012 and should finally rebound in 2013 provided a strengthening of external demand and the picking up of investments. Households’ disposable income being hit by high and persistent unemployment will keep domestic demand contracting. Reducing the budget deficit including structural reforms and servicing high foreign debt will remain the most challenging tasks for Croatian authorities. EU accession in 2013 may help to revive investments....more

Given the decline in both consumption and investments and in view of the budget consolidation measures already introduced or still in the pipeline, recession looms large in Hungary. Positive contribution of net exports has not been enough to sustain economic growth. The question as to when (if at all) the government will conclude an agreement on the financial assistance package with the IMF and the EU that the economy so badly needs is still open, as is the question whether the government will be prepared to adjust its (economic and other) policies to comply with the international community’s expectations....more

The Kazakh economy will not have the capacity to reach the 7% real growth target officially set for 2012. That notwithstanding, growth will still be relatively strong: 6% year-on-year. In 2013-2014 the economy will continue to rely on the oil sector as a primary source of growth. Developments in the banking sector continue to suffer from the consequences of the 2008 crisis, as the share of non-performing loans in Kazakhstan remains high....more

Last years’ revival after the economic disaster of 2007 to 2010 allows Lithuanian households to gradually recuperate their consumption levels, thereby acting as the main growth driver in 2012. The parliamentary elections in October shall bring about a change in the government from centre-right to centre-left. However, the orientation of economic policies – austerity and the target to join the Eurozone in about 2015 – will remain the same....more

Latvia is heading towards Eurozone accession and shall fulfil the Maastricht inflation and deficit criteria this year. However, the unemployment rate still amounts to more than 15% and the competitiveness of the industrial sector will remain a sore point of the Latvian economy. With sluggish export developments domestic demand is the trigger of GDP growth this year and 2013....more

In the short-term, prospect for growth in Montenegro is dim. Medium-term prospects are also not stellar. The start of negotiations with the EU should boost foreign investments: a helpful development. However, given the need to reduce still further the current account deficit and consolidate public finances, rapid recovery cannot be expected. The government stands ready to ward off political and social disaffection, but at some point a credible opposition will have to come to the fore in order to provide the much-needed impetus to democratic stability....more

The short-term prospects point to some growth in Macedonia that should pick up speed over the next few years, unless the crisis in Greece deteriorates to such an extent that the Greeks will be forced to leave the eurozone. In the medium term, Macedonia should enjoy some measure of recovery, but the country’s potential growth rate will hardly exceed 3% given the institutional and regional fundamentals....more

Fiscal consolidation is likely to slow down growth in Poland in the coming years. The economy still benefits from its size, versatility and relative closeness – as well as from its exchange rate and labour market flexibility. The good financial standing of the business and banking sector should support growth. However, the ambitious nature of the incipient fiscal consolidation programme and the return of restrictive monetary policy will act as brakes on growth....more

In Romania the new, centre-left government concentrates power and dilutes fiscal austerity. Controversy between government and president increases political uncertainty. The economy may come out of technical recession based on household demand and exports in the second half of the year....more

In Serbia recovery is unlikely this year and the prospects for the next two years will hinge on political stability and the economic policy pursued by the new government. The chances are that stagnation or slow growth is in the cards in the medium term....more

After a robust first quarter, Russian GDP growth has begun to slow down. wiiw forecasts unspectacular growth during 2012-2014, assuming no abrupt policy changes or severe external shocks. Export revenues will grow rather slowly due to stagnating volumes of exported oil and gas; imports are expected to grow at a faster rate as household consumption and investment will gradually pick up, both fuelled by the ongoing real currency appreciation. In the medium and long run, reforms and investment (including FDI) may be stimulated by WTO membership, while the attempted large scale modernisation will bring few of the desired benefits any time soon. ...more

Given the economic deterioration in Slovenia’s most important EU trading partners and the need of fiscal consolidation Slovenia will remain in recession in 2012 and rebound only slowly thereafter. The corporate and household sectors will continue to deleverage and asset quality of the ailing banking sector has to be strengthened. Returning recession will exert upward pressure on the unemployment rate not only in 2012 but probably in 2013 as well. Consequently household consumption growth will remain subdued....more

Despite the EU crisis, export-led growth continued in Slovakia in the first quarter of 2012. The economy will expand by more than 2% this year. Growth will again be substantiated by the net exports, bolstered by still low unit labour costs and supported by the expansion of production in the automotive sector. The new government presumably will modestly stimulate private consumption. However, downward risks still prevail as resolution of the European debt crisis remains the crucial factor....more

Three phenomena are topical features of the Turkish economy: relatively low real GDP growth after a spectacular growth bonanza in 2010-11; relatively high, albeit decelerating, inflation; and a somewhat diminished, though still high current account deficit. This deficit, which is of a structural nature, raises concerns about the long-term sustainability of high growth. This notwithstanding, growth may re-accelerate in 2013 and 2014, if external circumstances allow for this. In recent years, Turkey's exporters have been successful in selling to non-EU countries, and this is likely to continue during the next few years. Slow growth or stagnation in the EU has an impact on Turkey, but not necessarily an overwhelming one....more

In Ukraine, a less buoyant domestic demand will likely result in a slowdown of economic growth to around 3% in 2012, with risks on the downside. Both fiscal and monetary policies have been relaxed recently, but may not generate sufficient demand in the environment of elevated uncertainties. While currency depreciation pressures have been so far largely counteracted, the high dependence on external funding will continue to remain a source of risk for the financial stability. The country’s increased political isolation implies that the association and “deep” free trade agreements with the EU will not be signed at least until the October 2012 parliamentary elections....more