EBRD: Major downgrade to TE growth outlook
Overview:
The EBRD has announced a major downgrade to its growth outlook for the Transition Economies (TE) relative to that made in July. While growth in 2011 is now expected to be a bit softer than first thought the major change is in 2012. A significant reduction in growth is seen as a result of the protracted euro zone crisis. This impacts some regions more heavily than others. Central and South Eastern Europe are more integrated with the euro zone in a number of ways than other regions. The result of the downgrade leaves economies in the most affected regions growing but at a very modest pace. Indeed, there are downside risks to this gloomy scenario too. Instead of the assumed slowdown the Euro zone (and/or the U.S) could actually enter recession. In this scenario, commodity prices would drop affecting growth in other regions too.