- This year the biggest issue for Central Europe is the Eurozone slow down.
- Turkey is mostly a yield play, even with the forecast this year.
- In 2019, opportunity is returning to emerging Europe and Africa.
Over the past few years, we have seen a very brisk economic expansion in Central Europe. While this is very positive for the region, there are some longer-term negatives that that may come to light in the coming years. We think in 2019 the biggest challenge for Central Europe is the slowdown in the Eurozone. This is due to the deterioration of global trade links with countries in the euro area, and Central Europe will feel the trickle-down effects of this.
“We see Eastern Europe supplying Germany, which in turn is supplying China, and so as long as China is doing well then Europe does well.”
Looking further east to Turkey, its economy is now reeling from the negative effects of the exchange rate shock last summer. We have a contraction forecast for Turkey; we expect the Turkish economy to contract by around 3% compared to 2018.
“In South Africa’s case, the main problem to deal with is the slow reform momentum, and the improvements in the governance framework.”
Last year there was a great deal of optimism around Cyril Ramaphosa, but since then unfortunately that confidence has not translate into stronger economic activity. The economy returned to growth in the third quarter of 2018, and we think the growth trend will continue through 2019 as well. It is worth noting that there has been slow progress in delivering the reforms and addressing the state capture concerns. We predict growth will only be at around 1.5%.
Head of Fixed Income Research, EMEA
Senior EEMEA Economist
Central Europe Economist