Higher inflation persists amid a stronger rebound: S&P

According to the newest Economic Outlook by S&P Global Ratings, within emerging Europe, the Middle East, and Africa, economies have surprised again with stronger-than-expected growth numbers, primarily stemming from higher consumption and exports. Available indicators suggest that GDP growth in the region for the full year will be higher than June predictions. S&P has raised its 2021 GDP growth forecasts for Poland (5.1 percent), Russia (4.0 percent), South Africa (4.6 percent), and Turkey (8.6 percent).

“Inflation in emerging Europe continues to rise, drifting further away from the central banks’ targets, as higher fuel and food prices and supply chain disruptions interact with a stronger economic rebound. EMEA central banks will continue to navigate a complicated landscape, seeking a balance between supporting the recovery and anchoring inflation expectations in an environment where supply-side pressures may last longer than previously anticipated,” the report reads.

The analysts from S&P argue that the key downside risk to the EMEA outlook is insufficient progress in vaccination, which makes countries vulnerable to future waves of infection. Other downside risks originate from abroad and include faster-than-expected monetary policy normalization in the U.S. and spillovers from a potential sharp worsening in China's property market. 

“An upside risk to the near-term growth outlook is additional stimulus, beyond what we incorporated in our projections. The stimulus can, however, prove inflationary,” S&P stated.

(WBJ)