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What to Watch for in Eastern Europe

South-Eastern Europe could throw up some surprises to the downside, Peter Attard-Montalto, emerging market economist at Nomura, told CNBC.

Istanbul's Arasta Bazaar
Maremagnum | Photographer's Choice | Getty Images
Istanbul's Arasta Bazaar

Not enough consideration has been given to how much growth will be dragged down by euro zone bank deleveraging, he said, especially in countries such as Serbia and Romania.

Forecasting the next policy step from the Turkish Central bank was a particular challenge for economists like himself, Attard-Montalto said, comparing trying to predict its next move to playing online fantasy game World of Warcraft.

’”The central bank there is playing an exceedingly complicated policy, and the Turkish economist at Nomura says its like playing Warcraft every morning, with the central bank governor, trying to work out what he’s going to do,” he said.

Markets may be skeptical about Turkey, which has seen exceptional growth over the last ten years but has looked vulnerable in recent months, but Attard-Montalto is moderately positive on economic growth in the country.

Poland will also probably beat market expectations in terms of growth, although Attard- Montalto expects two interest rate hikes this year, one in June and July.

’’They’re [ratcheting] up their rhetoric and talking about a hike in the ‘nearest future,’ as they put it yesterday,” he said. “The trouble is the market didn’t see this at all.”

The Polish cental bank's monetary policy committee has become more confident in its outlook for growth. Inflation should remain around 4 percent over the target of 3.5 percent, to the end of the year, Attard-Montalto said.

Meanwhile with snowballing debts, the Hungarian government is trying to stimulate its economy, but Attard-Motalto said the 18 percent minimum wage rise will raise prices via inflation and end up hurting the consumer.

Contact Europe: Economy

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