EDITORIAL

The short-term outlook for the SEE economies has taken a significant turn for the worse in recent months. In its latest forecasts, published in October 2011, the EBRD significantly cut its forecasts for growth in the region in 2012 by an average of more than two percentage points relative to the July forecasts. The biggest reductions were in Albania, Romania and Serbia.

The main reason is the worsening crisis in the eurozone, the effects of which are bound to be felt throughout SEE
because of the close trade, investment and financial linkages that this region has developed with the eurozone.
Vulnerabilities are particularly severe at present, and confidence is low (see “Analysis” section on page 3). Some
mitigating factors are also present: most countries have been fiscally prudent throughout the crisis, banking sectors are well-capitalised, and several countries are benefiting from IMF programmes. Nevertheless, the downside risks remain considerable and further downgrades to the 2012 forecasts are a distinct possibility.

Author: Peter Sanfey, Deputy Director for Country Strategy and Policy, EBRD