In Albania, the political system is still showing signs of pubescence. The recent municipal elections culminated in a fierce dispute over the outcome of the ballot in the country’s capital, Tirana. Nevertheless, in terms of economic development things seem to be improving. The growth rate for 2011 is expected to be slightly over 4%. A similar growth rate is expected for 2012 and a somewhat higher rate for 2013. The main drivers are further export growth and an improvement in consumer and business confidence....more

In the Baltic States, particularly Estonia, exports since the end of 2010 have expanded much more firmly than expected. Similarly, an upsurge in gross fixed investments has been the main growth driver in Latvia and Lithuania, while household consumption will also gain some momentum at a later stage. We expect GDP to increase between 3.6% in Latvia and 5.7% in Estonia in 2011. Each of the three countries will grow between 4% and 5% in the two years thereafter, when growth in external demand will abate. Despite faster GDP growth, the situation in the labour markets will remain disappointing for a long time to come....more

In Bosnia and Herzegovina, exports expanded substantially in 2010 and the first months of 2011, but this did not trigger much GDP growth, as the export sector‘s GDP contribution is rather small. Large parts of the business sector are still in worse shape than they were before the crisis; the public sector finds it difficult to make ends meet. The flow of funds from Paris Club creditors will remain interrupted pending the establishment of a new central government after the elections held in October 2010. Households continue to rely heavily on remittances. Prospects of EU accession are poor....more

In Bulgaria, GDP grew by 1.5% year on year in the first quarter of 2011 thanks to a continuing export boom. The unusually robust export performance contributed to a reversal in the current account balance; the latter turned positive in 2011. However, domestic demand has remained depressed, with both private consumption and fixed investment, in particular, shrinking still further in the first quarter. The outlook for 2011 and thereafter is moderately positive, yet uncertainties prevail with respect to the sustainability of the current export-led recovery....more

In Croatia, GDP growth in 2011 should finally rebound, the proviso being that external demand, particularly the demand for tourism services, improves. High unemployment may hamper a more pronounced recovery in household consumption. The burdens associated with high foreign debt servicing and reducing the budget deficit will remain the most serious challenges in the years to come. Prospects of joining the EU in 2013 may stimulate foreign investment flows; a negative referendum on accession to the EU would be a clear setback....more

In the Czech Republic, economic growth in the current year will slow down. Fiscal consolidation measures – if consistently implemented – will restrict household consumption. However, it is hoped that fixed investment will register a modest take-off. Foreign trade, depending predominantly on exports to Germany, has assumed the lead – and positive – role. Monetary policy is expected to remain relaxed, thus helping to check currency appreciation. The political situation will remain highly volatile....more

In Estonia, exports have expanded much faster than expected since the end of 2010. This has led to a substantial upward revision of economic growth forecasts. A revival of gross fixed investment acts as an additional growth driver as well as household consumption. For 2011 we expect GDP to grow by 5.7% in Estonia. In the subsequent two years, when growth in external demand will be abating, we expect only a slight deceleration to 4.5% and 4.8% p.a. Despite the revival in growth, the situation in the labour markets will remain disappointing for a longer period. ...more

In Hungary, post-crisis growth has been driven solely by external demand. Investment and con-sumption are suffering on account of legal uncertainties and impaired financial intermediation. For 2011, nationalizing the assets of private pension funds will secure a one-off fiscal surplus. Interna-tional investors have demonstrated their appreciation of the government’s fiscal plans. The slow export-based recovery is expected to continue in 2011....more

In Kazakhstan, GDP growth for 2011 is forecast at 7% thanks to high global oil prices. Oil exports are hampered by shortcomings in terms of both transport infrastructure and production capacities. In the biennium 2012-2013 the Kazakh economy will grow by 6%. Both consumer and investment demand will rise, the latter more rapidly. The banking sector has not yet fully recovered from the crisis. As asset cleansing gets underway in the banking sector, the economy will benefit from a gradual improvement in access to funding. As a result of high global food prices, CPI in 2011 will increase to 8%. In the biennium 2012-2013, inflation will slow down to around 7%. ...more

For the whole year 2011, we expect the Latvian GDP to grow by 3.6% in real terms. Gross fixed investment, especially in industrial sectors, as well as the process of restocking are expected to act as the main growth drivers this year. The financial situation of indebted households and high unemployment will allow private consumption to increase only slightly, while the government’s consolidation measures will further reduce public consumption. Although the current account will still remain positive in 2011, net trade will contribute negatively to overall economic activity. In the years 2012 and 2013, GDP growth is likely to pick up further to 3.8% and 4% respectively, mainly thanks to the ongoing revival of capital investments. A slight amelioration of the labour market situation and some revival of real incomes should allow households to expand consumption henceforward more swiftly again....more

In 2011 we expect economic growth to reach 5% in real terms. Gross capital formation will again be the strongest driver of the upswing. However, also a slight increase in household consumption will back up domestic demand. With the move of the current account into deficit, net trade again starts to contribute negatively to overall growth. Economic activity is likely to abate somewhat in 2012 and 2013 compared to this year. The strong revival of exports will subside, but domestic demand should regain some momentum due to rising wages and a revival of lending activity. Thus we expect GDP to grow by 4.4% and 4.6% respectively in real terms in the subsequent two years....more

In Macedonia, the crisis has had a milder effect than in most other countries in the region. GDP decline was only 0.9% in 2009. Recovery was also unremarkable: GDP growth of only 0.7% in 2010. Some acceleration, about 2%, is expected for 2011. Unlike most other countries in the region, employment has been on the increase throughout the crisis, although the unemployment rate remains at a very high level: some 30%. In summary, the real economy creates the impression of stability, albeit at a low level of activity....more

In Montenegro the decline in output was quite marked: about 6% in 2009. In 2010 the economy did not recover all that much. GDP growth will pick up speed somewhat in 2011, increasing to 2%. It is expected that the EU will set a date for the start of negotiations on accession: possibly December this year. That will be of benefit to the financial markets, as the state is borrowing in commercial markets. It will also mean increased transfers from EU funds....more

In Poland, the robust GDP growth is expected to continue. Growth will be driven primarily by do-mestic demand – in terms of both consumption and investment. Improvements in industrial labour productivity will help to contain the impact of any eventual currency appreciation. Trade develop-ments will play a secondary – but increasingly negative – role. Whereas fiscal consolidation will proceed at a fairly gradual pace, monetary policy seems determined to combat inflation more vigorously than elsewhere in the EU. ...more

In Romania, the economy is emerging from a protracted period of depression. Recovery is driven by net exports and the accumulation of stocks, while domestic consumption and gross fixed capital formation continue to contract still further. Implementation of the 2011 budget execution is on track and should meet the deficit target for the current year. The forecast for the election year 2012 points to an acceleration of economic growth and no increase in fiscal austerity. This will be followed by renewed stabilization measures and slower economic growth in 2013. ...more

In Russia, the economy has been growing by about 4% per year. Huge fluctuations in prices and inventories are affecting the reliability of GDP growth figures. Inflation has accelerated and remains stubbornly close to 10%. The long-term strategic target of economic diversification and moderniza-tion remains high on the agenda. The wiiw forecast reckons with continued, yet unspectacular, GDP growth over the period 2011-2013. With some luck, inflation may remain in single digits during 2011 and the budget deficit will evolve into a surplus. We have every expectation of President Medvedev being re-elected and the ruling Medvedev-Putin tandem continuing after March 2012....more

In Serbia GDP growth this year is expected to be 2.5%. Next year, it should accelerate to 3%. An inflation rate of more than 10% has raised concerns as to stability. Much will depend on the outcome of the general elections next year. Social pressures and unrest usually accelerate in the run-up to the elections; they have already become more than apparent. It is also expected that negotiations on EU membership will start next year: something that should have a stabilizing effect....more

For Slovakia, wiiw expects a respectable GDP growth of 4% for 2011 and the two years thereafter. Growth is mainly driven by net exports, the major driver being foreign demand for products of the Slovak automotive industry – most orders coming from Germany. Domestic demand will remain subdued owing to the fiscal austerity measures that are being implemented. Although the labour market is showing some positive signs, unemployment remains high. ...more

In Slovenia, GDP which is driven primarily by foreign demand will grow by 2% in 2011. The enterprise sector is currently facing liquidity problems and needs to deleverage, thus there is little room for investments. Somewhat faster growth can only be expected in the years to come, as long as investment enjoys a recovery and private consumption registers some improvement. For the latter to happen, however, the labour market will have to improve as well. Given the ongoing fiscal consolidation, public investment will need time to recover. Solving the political problems will be one of the main prerequisites for a return to a sustainable growth path....more

In Turkey, record GDP growth, 8.9% in 2010 and 11% in the first quarter of 2011, heightened the country’s attractiveness to international investors. Nonetheless, that rapid growth, coming as it does in tandem with a trade deficit that expanded rapidly and has become alarmingly high, has triggered fears of the bubble bursting all of a sudden. The central bank has not responded by increasing interest rates, but has chosen to impose higher reserve requirements on commercial banks. Signs of growth deceleration have already become visible in the course of the current year; however, the extent to which this can be attributed to monetary policy is still unclear. Fiscal policy may also become more restrictive, with the ruling party having secured a landslide victory in the elections. The forecast hints at the possibility of the boom gradually cooling down....more

In Ukraine, the economy will continue to recover, benefiting from the newly gained political stability. Relatively good budget performance and favourable financing conditions have reduced the willingness to implement the austerity measures, resulting in a suspension of the IMF stand-by programme. In the short and medium term, we expect a continuation of the current growth path of 4-5% per year, driven largely by domestic demand and accompanied by a moderate widening of current account deficits. The free trade negotiations with the EU have advanced recently; they might come to conclusion by the end of 2011....more