October is a month of statistics, as several international financial institutions (IFIs) release their autumn outlooks. The influence of IFIs and international organisations in general has increased a lot during the last two years as they have provided crucial financing, opinions and advice on the financial and economic crisis and recovery. There is a plethora of organisations, but the G20 has arguably grown to be the most important in terms of policy-making, although it has no or very limited human or financial resources. It has delegated much of the implementation to the IMF, which has therefore grown even more important. Regionally, the European Bank for Reconstruction and Development (EBRD), which was regarded as a rather bureaucratic and slow investor prior to the crisis, has been reinvigorated. Not only due to its financing capabilities but also because of the role it played to avoid a systemic banking crisis in Eastern Europe in 2009. So, it is fair to say that the market now pays more attention to the forecasts and the analyses made by these institutions.
The October outlooks from the IMF and EBRD did, however, not provide any major surprises. Both houses increased their forecast for Eastern Europe since this spring/summer. The EBRD thinks the region will grow 4.2% this year and 4.1% in 2011, which is considerably better than the 3.5% and 3.9% it forecast in July. The IMF, which divides the region into Central Eastern Europe (CEE) and the Commonwealth of Independent States (CIS), also increased its outlook quite considerably, especially for some of the countries in CEE, such as the Baltic States.
The positive growth revisions reflect not only the rapid recovery in Eastern Europe, but also the faster-than-expected global recovery. The fact that the IMF now expects the global economy to grow 4.8% this year, which is a high number historically and not least compared to the 3% expected a year ago, is sometimes forgotten in the midst of all the global economic uncertainty and talks about currency wars and potential trade conflicts. Growth is expected to come down to 4.2% next year, but that is still fairly strong, especially as inflation in advanced economies is expected to drop from 1.4% this year to 1.3% in 2011. In Eastern Europe, most economies are experiencing record-low inflation this year, and the levels are expected to drop even further next year. That means that on average across Eastern Europe, growth will be maintained, while inflation will drop to new record lows. That should bode well for equities, but we will get back to you with a more detailed forecast for next year, next month.