The Spring Forecast of the European Commission has been released, and it covers EECFA member countries: Russia, Turkey, Romania, Serbia, Slovenia, Croatia, and Bulgaria, it only lacks Ukraine from the EECFA’s coverage. The EC forecast is intensively used in the EECFA reports for assembling the macro-economic environment, and also as a demand driver in specific segments. For example, consumption leads the demand for commercial buildings in the long run, or office sector’s employment drives the need for office buildings.
In this short note we are presenting the key facts about the EECFA countries in the Commission’s report, looking at how macro forecasts have changed since 2015 Autumn.
Chart 1 GDP growth forecast of EECFA countries and the EU (average 2015-2016-2017) Source: EC
Chart 1 presents the general economic outlook in the relevant countries – GDP growth from 2015 until 2017. Turkey leads the group with a close to 4% growth, even better prospects than in autumn. Romania and Bulgaria perform better than the EU average. Serbia and Croatia are lagging behind, while Russia is in a serious recession period in the forecast horizon.
In most of the countries of the region, economic outlook has improved since the latest forecast in Autumn 2015. The biggest change in the expectation was in Bulgaria, where forecasted GDP growth increased from 1.7 to 2.5 percent between Autumn 2015 and Spring 2016. Despite the positive outlook of EECFA, we can’t be optimistic regarding Russia where GDP is likely to shrink in the next 2 years; moreover, the rate of decrease has surged since Autumn 2015.
Chart 2 The Gross fixed capital formation growth, and if available the building construction growth (average 2015-2016-2017) Source: EC
As it can be seen on chart 2, gross fixed capital formation growth is high in EECFA, which can be explained by the GFCF’s pro-cyclical characteristic. Serbia and Romania have the biggest GFCF growth rate among the examined countries, where GFCF is set to go up between 6.8-7.8 percent. In Turkey and Croatia the estimated growth is between 2.5-3.8 percent; in Slovenia and Bulgaria growth can be between 0-2 percent. The only country where GFCF declines is Russia; the expected shrinkage is near 4 percent.
Written by Aron Horvath, PhD, Head of Research, EECFA, ELTINGA