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Eastern European Outlook, October 2015: Economic picture remains divided - Russian recession in 2016 too - Seite 2

The inflation picture in Eastern Europe will also remain divided. High inflation in Ukraine and Russia, driven by earlier currency depreciation, has largely culminated in recent months and will gradually continue downward. In most other Eastern European economies, inflation is under strong pressure as in the West but is past its low point or is about to hit bottom. Inflation will climb only weakly as a consequence of relatively rapid pay growth. Continued low commodity prices will have a restraining effect.

Here are our GDP forecasts for the six countries that Eastern European Outlook covers. SEB's forecasts for 2015 and 2016 are generally somewhat below consensus. 

• Russia's GDP will continue its decline in 2016 but the downturn will ease to 1.0 per cent from this year's 4 per cent. Growth will be slowed by low oil prices, sanctions and structural problems. In 2017 as well as in the long term, we expect growth to reach a low 1.5 per cent.

"Without far-reaching reforms that address such problems as Russia's poor business climate, weak capital spending and heavy dependence on oil exports, there are risks that economic growth will be very weak in the future as well," says Andreas Johnson, who is in charge of Russia  and Ukraine forecasts at SEB Economic Research.

• Ukraine will see yet another sharp GDP decline this year, 12 per cent, and then experience weak growth in 2016-2017. The country's recent debt write-down agreement with private lenders and on IMF bail-out loans will contribute to stabilisation.
• Poland will see stable growth, accelerating a bit to 3.6 per cent in 2016 and 3.8 per cent in 2017. We expect a change of government after this autumn's parliamentary election. There are clear political dividing lines between the current government and its likely successor, but the growth picture will not change appreciably.  
• Estonia's 2015 growth forecast has been written down a few tenths of a point due to weak exports, but growth will rebound - sustained primarily by a consumption boom and strong demand from Sweden and elsewhere. GDP will increase by 2.7 per cent in 2016 and 3.4 per cent in 2017.
• Latvia will be the fastest-growing Baltic country. GDP will climb by 2.7 per cent next year and 3.5 per cent in 2017, but the latter is only a bit above potential growth.
• Lithuania will experience leisurely growth this year, slowed by Russian effects but also by low prices that have hurt the country's important refined oil exports. Growth will accelerate to a decent 3 per cent or so annually during 2016-2017.

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