As we enter 3Q, the global economy faces more uncertainty than it has for a number of quarters. Most recent high frequency indicators have shifted downwards, though from a high level. The EMU crisis has seen a further escalation as Greece continues to disappoint in terms of reform implementation. At the time of writing discussion was underway on the potential for EMU member states to put considerably more funding on the table, prompting a re-consideration of EMU's approach to private sector 'burden sharing', with yet another EU weekend summit approaching.
The most pressing issue is the ability of CEE to withstand this global slowdown, even if only temporary in nature. That CEE is synchronized with global developments is not in doubt. To date the most obvious sign of a slowdown in economic activity in the region is seen in the manufacturing PMI data. Over the three months to May,the manufacturing PMI indices have fallen between a cumulative 1.2 points in Poland to a much larger 7.9 points in Turkey. There are also some signs of a disimprovement in consumer confidence in some of the new EU countries, as well as in Russia.
The above is a summary quote of the introduction to the 70 pages UniCredit Q3/11 forecast covering 17 Central and Easter Europe countries. Members can download it here.