Growth in the emerging and developing Europe and Central Asia region is estimated to have reached 3.8 percent in 2017, the strongest performance since 2011, helped by stabilizing commodity prices and strong demand from the Euro Zone. In addition, economies of the region rebounded from country-specific shocks in 2016. Growth is expected to moderate in 2018 to 2.9 percent. The forecast assumes a modest recovery in commodity prices, a gradual moderation of growth in the Euro Area following a strong cyclical pickup in 2017-18, an orderly tightening of global financing conditions, and no new geopolitical tensions.
Stable Outlook, Differences Across the Region
A relatively stable overall growth forecast masks considerable cross-country differences. Growth is expected to continue strengthening in the eastern part of the region over the next three years in line with firming commodity prices and strengthening domestic demand, supported by remittances. In contrast, growth in the western part of the region is anticipated to slow as the Euro Area recovery matures.
Regional Growth
Inflation was close to targets set by authorities across the region. For commodity exporters, inflation eased as the negative impacts of the oil price plunge of 2014-16 faded. Price levels in commodity importing countries are picking up as economic activity gains strength.
Inflation
Sources: Haver Analytics, national central banks
Rise in External Debt
External debt as a percent of export value increased markedly for commodity exporters after the oil price plunge, as the value of exports declined. Commodity importers’ external positions have started to improve recently.
External debt
Source: Haver Analytics
Slowing potential growth
Economic growth slowed more sharply after the global financial crisis in the Europe and Central Asia region than elsewhere. Cyclical factors affecting this slowdown, such as the European debt crisis and the oil price plunge, slowed growth by 3.3 percentage points, 1 percentage point more than other regions. The negative demographic prospects of aging populations, alongside slowing investment, cut potential growth by 1.4 percentage points.
Potential Growth
Working-age population share weighing on growth.
After the collapse of the Soviet Union, the fertility rate collapsed across the region. This started to have an effect on the growth in the working age share of the population (15-64) in the 2000s and continues to weigh on regional growth prospects.
Working age population growth
Source: United Nations
Stable Outlook, Differences Across the Region
A relatively stable overall growth forecast masks considerable cross-country differences. Growth is expected to continue strengthening in the eastern part of the region over the next three years in line with firming commodity prices and strengthening domestic demand, supported by remittances. In contrast, growth in the western part of the region is anticipated to slow as the Euro Area recovery matures.
Regional Growth
Source: World Bank
Inflation in CheckInflation was close to targets set by authorities across the region. For commodity exporters, inflation eased as the negative impacts of the oil price plunge of 2014-16 faded. Price levels in commodity importing countries are picking up as economic activity gains strength.
Inflation
Sources: Haver Analytics, national central banks
Note: Median of annual consumer price inflation for each sub group.
Rise in External Debt
External debt as a percent of export value increased markedly for commodity exporters after the oil price plunge, as the value of exports declined. Commodity importers’ external positions have started to improve recently.
External debt
Source: Haver Analytics
Note: Total external debt over exports of goods and services
Slowing potential growth
Economic growth slowed more sharply after the global financial crisis in the Europe and Central Asia region than elsewhere. Cyclical factors affecting this slowdown, such as the European debt crisis and the oil price plunge, slowed growth by 3.3 percentage points, 1 percentage point more than other regions. The negative demographic prospects of aging populations, alongside slowing investment, cut potential growth by 1.4 percentage points.
Potential Growth
Source: World Bank
Working-age population share weighing on growth.
After the collapse of the Soviet Union, the fertility rate collapsed across the region. This started to have an effect on the growth in the working age share of the population (15-64) in the 2000s and continues to weigh on regional growth prospects.
Working age population growth
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