For Albania, we expect GDP growth of 1.9% in 2011 and 2.2% in 2012 respectively and a stronger increase to 2.6% in 2013 and 3.4% in 2014, the latter due to the election cycle and induced populist government spending. The assumption is that the government has no problems financing fiscal expansion, that heavy rainfall in early 2012 will bring the vital electricity production back to normal and that export growth will continue despite the eurozone crisis (also with the help of further increasing crude oil export production capacities); remittances will tend to stabilize or at least fall at a slower pace as further unemployment in Greece might rather hit the public sector, where Albanians are not employed. Obviously, the risks are on the downside, very much so....more

The economy of Bosnia and Herzegovina will hardly grow substantially or may even shrink slightly in 2012. For the time being, there is nothing that would support expectations of a strong GDP decline. For the period after 2012 we can count with growth resumption, should external conditions allow for that. The main impetus needs to come from outside as a major home-made demand push is unlikely to happen. Prices will remain relatively stable, and no strong medium-term improvement on the labour market can be expected....more

In Bulgaria, GDP increased by 1.6% in 2011 but economic activity was weakening in the final months. While the export performance for the year as a whole was robust, sluggish domestic demand was a drag on economic growth. The process of macroeconomic rebalancing in 2011 was accompanied by a net outflow of financial resources. Short-term prospects have deteriorated and the economy is likely to stagnate in 2012....more

Should the euro area continue to ‘muddle through’ and thus avoid deep recession in 2012, the Czech economy would escape recession as well. But its growth in 2012 will be depressed by the stubborn attempts to meet the fiscal targets, no matter what. A euro area recovery in 2013 and beyond would naturally (by way of stronger demand for imports) help speed up growth in the Czech Republic. In addition, the fiscal consolidation measures will by then become less intense (also because of the next regular parliamentary elections to be held in 2014). Good financial standing of the banking and corporate sectors, relatively low level of household debt, combined with competent policy of the Czech National Bank (determined to keep a very relaxed policy even in face of temporary hikes in inflation) should, by then, help accelerate growth – first of investments and then of private consumption and overall GDP....more

After a year of strong economic activity, the recessionary developments in the eurozone also impair the growth prospects of the Estonian economy. Thus, the growth of investments will abate throughout 2012 while household demand will still support the trade cycle. Moreover, the latest protests and strikes in Estonia should give rise to stronger wage increases this year. In 2013 and 2014 a slight upswing of external demand should bring forth a revival of faster GDP growth....more

In Croatia, GDP growth will decline again in 2012 and should finally rebound only in 2013, provided external demand and competitiveness strengthen. The poor situation on the labour market will continue to be a major obstacle to a recovery in household consumption. The burdens associated with high foreign debt servicing and reducing the budget deficit including structural reforms will remain the most serious challenges for the new government. EU accession in 2013 may stimulate foreign investment flows....more

The Hungarian economy will slide into recession this year due to the austerity measures required to reduce the fiscal deficit to below 3% of the GDP. Further, but smaller consolidation measures will be necessary in 2013 as well. An agreement with the IMF and the EU may help partially restore confidence in the government’s economic policy; nevertheless, that would also mean the end of the ‘unconventional’ policy measures and probably a revision of some of the earlier introduced ones, such as the radical tax cuts. In the absence of an agreement with IMF and EU, the consequences may include a remarkable weakening of the exchange rate and serious difficulties in rolling over external debt....more

Kazakhstan’s economy exhibited outstanding real growth of 7.5% in 2011. We forecast that strong GDP growth of 5-6% in real terms will continue in 2012-2014. The oil sector will remain the backbone of the economy, accounting for the bulk of its exports and FDI. Investment growth is forecasted to speed up in 2012-2014 to about 8-10%, in particular owing to a number of state-financed investment projects. Banking sector vulnerabilities have been accumulating, with the share of non-performing bank loans reaching 21.7% and the BTA bank negotiating a second restructuring....more

In Lithuania, the slowdown of growth in exports and corporate investments that could be observed towards the end of 2011 will continue throughout 2012. In spite of parliamentary elections to be held in October 2012, the government reinforced austerity measures in order to reduce the budget deficit to below 4% of GDP. This will curb domestic demand throughout the year. Thus, the situation on the labour market will remain strained and outward migration especially of young people will continue. A revival of GDP growth to be expected in 2013 and 2014 should be backed by an external demand stimulus....more

The downturn of the European trade cycle leads to lowered growth prospects also for Latvia in 2012. The corporate and the household sector will continue to deleverage quite strongly, thus the growth in investments and household consumption will decline as well. Eager to join the eurozone in 2014, the Latvian government will most probably manage to reduce the budget deficit to below 3% in 2012. The greatest obstacle will however be to lower the consumer inflation rate to the Maastricht criterion. From 2013 onwards we expect external demand to trigger a revival in output growth....more

In Montenegro, growth prospects depend on the financial and fiscal stability, but are still not much above stagnation this year and slow recovery in the medium run. A start of negotiations with the EU would certainly contribute to overall stability....more

Growth prospects in Macedonia are still somewhere around 2% this year with some acceleration next year and beyond. The main driver is private investment which should recover due to relatively low private debt. The main risk is the possible contagion effect from the Greek crisis. There are still slim prospects for the start of negotiations with the EU....more

The general deterioration of conditions in the euro area (even in Germany) in the second half of 2011 has already affected the performance and prospects in most new member states. But so far Poland has kept its growth momentum. Growth in 2012 is likely to be satisfactory (though of course lower than in 2011) even if the euro area stagnates. The domestic economy is in no need for any meaningful deleveraging while fiscal and monetary policies will quite certainly not chase any overambitious goals. As in 2009 the Polish economy will benefit from its size, versatility and relative closedness. But the exchange rate volatility will continue to be a source of surprises which can be either pleasant or unpleasant....more

In Romania, a bumper harvest boosted GDP by 2.5% in 2011, a one-time effect that is due to vanish in 2012. At best 1% growth can be expected, driven by private consumption. A major factor of the economic slowdown is the expected stop in credit expansion. The fiscal situation is not expected to deteriorate under the close control of the IMF. The elections in November may lead to a cohabitation of president and government from opposing political groupings, which may increase political uncertainty....more

In Serbia, growth is grinding to a halt this year. Medium-term prospects depend in part on the outcome of the general elections in May and the presidential elections sometime this year. There is scope for significant economic policy changes and gradual recovery in the following couple of years. Improved relations with the EU – Serbia is now a candidate country hoping to start negotiating with the EU early next year – should prove helpful if sustained. The key issue is the huge drop in employment and possible social backlash....more

The Russian GDP grew by more than 4% in 2011 thanks to a robust recovery of fixed investment, construction and consumer expenditures. The contribution of net exports to GDP growth was sharply negative (despite a sizeable nominal increase in trade and current account surplus). wiiw reckons with unspectacular GDP growth during 2012-2014, assuming no abrupt policy changes or external shocks. Export revenues will grow rather slowly owing to stagnating volumes of exported oil and gas; import volumes 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 investments (including FDI) may be stimulated by WTO membership, while the attempted modernisation drive will hardly succeed any time soon. With some luck the annual CPI inflation may gradually drop to 5% and the budget deficit will remain balanced....more

Given fiscal consolidation and the expected growth slowdown in Slovenia’s most important EU trading partners, GDP will decline by 1% in 2012. A rebound of economic activity is expected only in 2013 since public investment will need time to recover and deleveraging of the enterprise sector is still going on. Household consumption will depend on improvements on the labour market. Slovenia’s economic recovery will largely hinge on the success or failure of the new government....more

While Slovakia achieved a successful year 2011 – with a GDP growth of about 3.3% – main challenges lie ahead. Due to the ongoing European debt crisis and worsened outlook for its main trade partners Germany and the Czech Republic, we revised our growth forecasts downwards and expect GDP to grow by 1.5% this year. Net exports might remain the main driver of GDP provided that external demand does not weaken even further. In addition, uncertainties derive from the forthcoming parliamentary elections to be held on 10 March 2012. In case of a government dominated by the leftist Smer party led by Robert Fico, we may expect weaker fiscal consolidation and thus slowly reviving private consumption....more

The growth of Turkey's economy was over 10% year-on-year in some quarters of the period 2010-2011. It may have decelerated recently, but it is not yet certain that this will lead to a more or less soft type of ‘landing’; a swift resumption of growth is feasible. In 2011, thanks to high real growth and a rate of inflation between 5% and 10%, growing budget revenues offered a nice opportunity to increase expenditures and decrease the budget deficit at the same time. This 'pro-active' fiscal policy will continue. The central bank, too, supports GDP expansion by keeping the policy rate low. However, this job is a bit tricky. The rate of inflation should not climb over 10%, and the exchange rate should remain rather stable. The high deficit in the current account is a main source of vulnerability. In the case of no major adverse external shock, growth is likely to accelerate again in 2013-2014....more

In Ukraine, booming private consumption and a bumper harvest contributed to an impressive 5% GDP growth in 2011. The budget situation improved markedly, and currency depreciation pressures were successfully counteracted. However, the recent monetary policy tightening coupled with weak external demand will likely dampen the growth prospects this year, possibly to below 4%, while dependence on external funding will remain a source of risk for financial stability. Following the ‘Tymoshenko case’, the association and free trade agreement with the EU have been put on hold and are unlikely to be signed before the end of 2012....more