On November 25 one of Romania’s most controversial and unnecessarily prolonged political crises, with profound economic and social implications, came to an end.
Disruptions in global value chains continue to weigh on Central and Eastern Europe, and the Delta variant is blurring the outlook for the fourth quarter. Record high inflation can no longer be written off as temporary as rates rise across CEE.
We anticipated an upside surprise, but the number came in even higher than expected. October inflation reached 7.9% versus our 7.8% estimate. While energy is still to blame, it is clear that price increases have become more generalised.
Threats to withdraw Bosnian Serbs from state institutions threaten to plunge the country into a deep and prolonged constitutional and security crisis.
A new centre-left government in Berlin could help create a two-tier Europe, especially if it promotes rule of law penalties.
Without a comprehensive normalisation of relations between Serbia and Kosovo, tensions will continue to fester and the daily lives of Kosovo’s Serbs and Albanians alike will be sorely affected.
In the push for reducing carbon, significant investment will be necessary, and in turn, funding will be required. This will provide growth for the credit market, and in particular for anything associated with ESG.
With the rapid economic recovery phase now behind us and the peak of the fourth COVID wave just ahead, the Romanian economy is starting to feel the need for additional growth drivers.
Targeted EU fiscal rule reform is desirable but should consider the inherent risks for smaller member states.