Bloomberg News

Eastern Europe Has ‘Little Evidence’ for Optimism, Capital Says

January 30, 2013

Eastern Europe has “little evidence” to justify improved market sentiment driven by more global appetite for risk, Capital Economics Ltd. said.

Growth in the region probably “slowed sharply” in the fourth quarter, economists at Capital led by Neil Shearing in London wrote today in an e-mailed note. Gross domestic product rose an average 1 percent last quarter, down from 1.5 percent in the third quarter and 4.8 percent in 2011, Capital estimated.

The euro area, the biggest export destination and main source of investment and bank financing for emerging Europe, remains in recession. Growth continued to slow even in former “star performers,” Russia and Poland, Capital said.

“The latest hard data suggest that activity in the region slowed sharply at the end of 2012, driven by weakening domestic demand,” the economists said. “Leading indicators are still consistent with weak growth at best in Germany and continued recession in the rest of the euro zone.”

Russia’s economy probably expanded 2 percent from a year earlier last quarter, its weakest pace since 2009, Capital predicted. GDP for the whole of last year probably expanded 3.5 percent, down from 4.3 percent in 2011, it said.

Poland’s economy grew 0.8 percent from a year earlier in the fourth quarter, compared with 1.4 percent in the previous three months, based on preliminary 2012 figures released last week, Capital said. The main drag on growth was the first decline in private consumption since at least 1996, it said.

To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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