November 2, 2016 / 8:02 AM / in a year

Emerging Europe to see slight growth pickup on Russia -IMF

PRAGUE, Nov 2 (Reuters) - Economic growth will pick up in central, east and southeastern European countries (CESEE) next year on economic recoveries in Russia and neighbouring countries, the International Monetary Fund (IMF) said on Wednesday.

The IMF forecast the emerging Europe region as a whole would grow by 2.1 percent next year, an acceleration from 1.3 percent in 2016.

This will be led by 1.1 percent growth in Russia in 2017, compared with a 0.8 percent contraction this year, helped by more favourable oil prices. The economies of Ukraine, Belarus and Moldova combined will expand by 1.6 percent in 2017 after 0.1 percent growth in 2016, it said.

“In (Ukraine, Moldova and Belarus), after exiting the recession in 2016, the recovery is projected to gather pace in 2017, supported by improved outlook in Russia, given linkages through trade and remittances,” it said.

Elsewhere in the region, a cyclical rebound may soon peak and growth will be difficult to sustain over the longer term. Central Europe will see a slight acceleration to 3.0 percent growth next year from 2.8 percent in 2016.

Growth in Turkey is expected to cool to 3 percent in 2017 from this year’s 3.3 percent, the IMF said, after a failed coup attempt in August and purges added to existing political uncertainty.

“In 2017, growth is projected to slow further as the one-off factors pushing growth in 2016 dissipate (e.g. fiscal loosening, increase in minimum wages), and headwinds from eroded business confidence further weigh on investment,” it said.

Overall downside risks to the growth prospect dominate in the entire region, although possibly less than six months ago, the IMF said.

The report did not focus on the potential fallout from Britain’s decision to leave the European Union, which is seen as a risk factor for European economies. It said longer-term impacts of Brexit are unclear.

There has been some decrease in concerns about China’s near-term prospects, the pace of monetary normalisation in key advanced economies, and the refugee crisis, the IMF said. But risks from rising populism - which may lead to reversal of growth-supporting reforms - have become more pronounced.

The IMF said the region needs a new round of structural reforms to raise investment and productivity.

Initiatives like efficient public investment are needed to lift its growth potential, given large infrastructure gaps compared with advanced Europe and low investment rates, the IMF said. (Reporting by Jan Lopatka; Editing by Andrew Hay)

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