In the run-up to the annual general meeting of the European Bank for Reconstruction and Development in Kiev there were encouraging indications that dire predictions about the economic demise of the countries of central and eastern Europe are looking increasingly wide of the mark.
That’s certainly the view of Marion Muehlberger, emerging market economist at Deutsche Bank in Frankfurt. In a recent research report, Eastern Europe: Tentative signs of a soft landing, she argues that a growing number of economic indicators point towards a managed slowdown in emerging Europe rather than a recession.
Although conceding that there are still risks of states in the region falling into the so-called Portuguese trap – whereby after years of rapid economic convergence with high credit, wage and income growth Portugal entered a long period of economic stagnation in 2001 from which it has yet to emerge – these are generally receding.
This is especially true in the Baltic states and Kazakhstan, where concerns about unsustainable growth levels had been highest. In all four countries, recent data releases show that credit, consumption and economic growth have slowed substantially.
| Real private sector credit growth |
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| Source: Deutsche Bank |
"While those are all positive signs, the countries are clearly not out of the woods yet.