The emerging markets in CE, SE and Eastern Europe include Romania, Poland, Hungary, Turkey, Serbia.

The emerging markets in CE, SE and Eastern Europe include Romania, Poland, Hungary, Turkey, Serbia.
The emerging markets in CE, SE and Eastern Europe include Romania, Poland, Hungary, Turkey, Serbia, Lithuania.

Monday, 25 May 2015

The economic situation and expected trends in the Emerging Markets in Europe: Bulgaria, Hungary, Romania, Poland, Czech Republic and Slovakia



BULGARIA
Bulgaria has a population of approx. 7 million and it is a EU member since 2007.
Real GDP growth is expected to moderate from 1.7 % in 2014 to 1.0 % in 2015, before slightly picking up to 1.3 % in 2016. An expected slowdown in public investment and continued weak private investment is likely to weigh on the growth outlook. Inflation is projected to remain negative well into 2015, but to turn positive towards the end of the year. After reaching 2.8% of GDP in 2014, the general government deficit is set to remain at 2.9% of GDP in both 2015 and 2016.
Private consumption is expected to slow down in 2015 in line with weak wage and employment growth. Employment is expected to remain broadly unchanged in 2015 and 2016, while the decrease in the labour force should further reduce unemployment to below 10 % in 2016.
  
HUNGARY
Hungary has a population of approx. 9.9 million and it is a EU member since 2004.
Hungary’s real GDP grew by an impressive 3.6% in 2014, but is set to slow down to more sustainable levels of 2.8% in 2015 and 2.2% in 2016 as growth-supporting factors, such as a record EU funds absorption, lose strength. Unemployment has fallen significantly and is expected to continue decreasing, while inflation is forecast to bottom out this year. The general government deficit will remain firmly below 3% of GDP over the forecast horizon.
In 2014, the unemployment rate decreased to a low of 7.7% and is forecast to decline further.
Domestic demand is expected to remain the main driver of economic growth, but with a shift from investment to private consumption. New mortgage rules are expected to raise households' real disposable income as banks will have to reimburse revenues considered to have been unfairly collected. In addition, in a context of low inflation, real wages are projected to increase throughout the forecast horizon
  
ROMANIA
Romania has a population of approx. 21 million inhabitants and it is a EU member since 2007.
Romania is one of the most dynamic emerging markets in the European Union. Romania’s GDP increased by 4.3% in the first quarter of 2015 compared to the same quarter of last year, after a y-t-y GDP growth of 2.9% in 2014 and of 3.4% in 2013. Romania’s industrial production went up by 3.3% in the first quarter of 2015 compared to Q1 2014 while the volume of construction work also increased by 13.4% year-on-year. Romania’s imports passed the EUR 5.6 billion mark in March setting a new record. The imports were 17.6% higher than in February and 11.6% higher than in March 2014. 
Economic growth in Romania is forecast to remain robust in 2015 and 2016, driven by strong private consumption and recovering investment. Inflation is expected to fall significantly in 2015 and remain low over the forecast horizon. The fiscal consolidation path is projected to be reversed in 2016.
Romania's economy grew by 2.8% in 2014. The main engine was private consumption with marginal contributions from net exports and inventories. GDP growth is forecast to remain robust and above potential at 2.8% in 2015, mainly driven by private consumption and investment. Accelerating domestic demand, again boosted by cuts in indirect taxation, as well as a benign external environment, are expected to lift real GDP growth to 3.3% in 2016.
Consumer sentiment is at a post-crisis high and expected wage increases accompanied by a lower VAT rate for food as of June 2015, a more favourable labour market outlook and low inflation are set to raise household real disposable income.
Employment in Romania grew by 1% in 2014, this being the first yearly increase since the outbreak of the crisis. It is projected to continue growing in 2015 and 2016. The unemployment rate dropped to 6.8% in 2014 and is expected to decrease further to 6.4% by the end of the forecast period.
Agriculture contribution to GDP is around 7%, compared to the EU average of 3%. Schemes to increase the productivity and to support young farmers, to develop further or restructure small farms, as well as the development of short supply chains are being supported through EU funded programmes.
Planned expansions in the automotive, pharma and telecommunications industries and ongoing motorway construction are expected to further support investment.

POLAND
Poland has a population of approx. 38 million and it is a EU member since 2004.
Economic activity is set to remain robust on the back of solid domestic demand, bolstered by improving labour market conditions and strong investment activity. Public finances are projected to improve gradually.
Poland’s real GDP grew by 3.4% in 2014 despite external headwinds, such as the Russia-Ukraine conflict. Investment rose by 9.2%, mainly thanks to the corporate sector where firms increased their production capacity amid favourable financing conditions. Private consumption also contributed to economic growth. Consumer sentiment has been improving on the back of higher disposable incomes, as both employment and real wages increased. The saving rate of households narrowed while consumer credit expanded.
Growth momentum is expected to remain robust over the forecast horizon, underpinned by solid domestic demand. Private consumption is set to strengthen further as real disposable incomes continue to rise on the back of favourable labour market developments and subdued inflation. The investment ratio is expected to continue increasing in light of low funding costs and various government measures supporting housing investment.
Consumer prices were stable in 2014 and are expected to decrease in 2015 as a result of falling energy and food prices. The decline of food prices is set to be driven by global trends, an exceptionally good harvest in 2014 and the impact of the Russian embargo on various agricultural products.
Poland’s labour market is forecast to benefit from the solid pace of economic activity and growing production capacity. The unemployment rate is set to decline from 9% in 2014 to 7.9% in 2016

CZECH REPUBLIC
The Czech Republic has a population of 10 million and it is a EU member since 2004.
The country returned to growth in 2014. This was largely driven by domestic demand, with net exports detracting slightly. Domestic demand is expected to remain the main driver of growth in 2015 and 2016, with net exports projected to contribute negatively in 2015 but positively in 2016 as the external environment improves. The headline general government deficit is set to remain unchanged in 2015 and to decrease in 2016 due to a favourable macroeconomic environment.
There was a strong turnaround in the performance of the Czech economy in 2014, with real GDP growing 2.0% after a contraction of 0.7% in the previous year. The rebound in investment was particularly strong, although falling inventories weighed slightly on growth.
The renewed strength of the Czech economy has led to improved labour market conditions, with unemployment falling to 5.8% in the fourth quarter of 2014. Wage growth also started to strengthen, with compensation per employee rising by 3.0% in 2014, significantly outpacing growth in consumer prices. These conditions have boosted private consumption, which rose by 1.7% in 2014.
Investment rose by 4.5% in 2014, compared to a contraction of 4.4% in 2013.

SLOVAKIA
Slovakia has a population of 5.5 million and it is a EU member since 2004 and a member of the EURO zone since 2009.
Growth picked up in 2014 and is forecast to further strengthen on the back of a recovery in domestic demand. Labour market conditions are expected to continue improving, in line with the upturn in economic activity. Inflation was slightly negative in 2014 and is projected to recover only slowly. Slovakia's fiscal situation is expected to improve gradually, also thanks to its increasingly tax-rich growth structure.
After slowing down in 2013, growth picked up in 2014 on the back of a strong recovery in private consumption and investment. Domestic demand is expected to continue strengthening and to remain the main motor of growth. Real GDP increased by 2.4% in 2014 and is projected to expand by 3.0% in 2015 and 3.4% in 2016.
Investment rebounded strongly after two years of decline and grew by 5.7% in real terms. Equipment investment and non-residential construction were the main drivers of investment growth, while housing construction contracted. Planned expansions in the automotive and telecommunications industries and ongoing motorway construction are expected to further support investment, which is projected to increase by 4.6% in 2015 and by 3.7% in 2016.

For tailor-made market opportunity analysis, investment and B2B matchmaking with players in the emerging markets in Europe, feel free to contact FRD Center team at: email: europa@frdcenter.ro or tel: +4021 411 1459/ 60/ 61


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