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December 2023: Emerging Europe Update

Updated: Feb 22



In December, global emerging markets experienced robust growth, with a 3.9% increase following a substantial 8% rise in November. The strongest performance was seen in Latin America, particularly with Mexico recording a 9% increase and Brazil a 7% increase. Conversely, China and Turkey saw declines of -2 % and 6.2%, respectively.


Despite persistent geopolitical risks, inflation in the US, UK, and EU fell more than anticipated, primarily driven by decreased energy prices. The US Federal Reserve opted to maintain interest rates at their 22-year peak of between 5.25% and 5.50% in December, aligning with market expectations. The Fed noted a slowdown in economic activity compared to the strong pace seen in the third quarter, with projections indicating a likelihood of three rate cuts in 2024. Fed Chair Jerome Powell suggested that interest rates were likely at or near their highest point.


In the Eurozone, GDP contracted by 0.1% in the third quarter, with year-on-year GDP remaining stagnant following 0.6% growth in the previous quarter. Economic activity in the EU continued to face challenges, as indicated by a Purchasing Managers' Index (PMI) of 47.6 in November, marking the sixth consecutive month of struggle.



Expectations for significant interest rate reductions in 2024 and 2025 are fueled by declining economic growth, lower energy prices, more moderate wage increases, and gradually rising unemployment.


China's economic activities in the third quarter of 2023 surpassed expectations and showed signs of improvement compared to the second quarter, attributed to policy support. However, challenges remain, particularly concerning the real estate market and local government bonds, which are closely linked. Forecasts for China's GDP in 2023 range between 4.8% and 5.2%, with a projected GDP growth of 4.4% for 2024.


Commodity markets saw a slight softening in December, with Brent crude declining by 7%, natural gas remaining steady, and gold slightly strengthening by 1.2%.


In Turkey, official inflation remained stubbornly high at 65% year-on-year in December, with independent reports suggesting even higher figures. The Turkish Central Bank continued its tightening policy by implementing a 250 basis points rate hike, with further increases expected in January. The Turkish lira remained stable throughout December.


In Central and Eastern Europe (CEE), Poland's new pro-EU government won a vote of confidence, securing funds from the EU's pandemic recovery fund.


Regarding Russia, European Union countries collectively endorsed the implementation of sanctions against Russia, including restrictions on diamond imports. However, tanker exports were not banned. The S&P Global Russia Manufacturing Purchasing Managers’ Index (PMI) rose to 54.6 in December, indicating improved sector performance driven by industrial growth and increased spending, marking the strongest rate of improvement in almost seven years.


January 10, 2024

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