Economic Analysis - Full Employment A Headwind For Growth - NOV 2017


BMI View: After a particularly strong 2017, ec onomic growth in emerging Europe is set to slow the coming years. Headwinds range from the challenges posed by full employment and corresponding threats to competitiveness, rising inflation and the need for tighter monetary and fiscal policies, and significant levels of political risk.

Conditions were ripe for growth across emerging Europe in 2017. External demand was buoyed by stronger global growth, most importantly in major eurozone export markets. The combination of tight labour markets, strong wage growth, rising consumption, and in some cases fiscal expansion, has not yet lead to a strong rise in headline inflation, allowing policy rates to remain at historic lows. While our forecasts imply another relatively strong year in 2018, economic growth is set to slow. Although varied among countries, headwinds range from the challenges posed by full employment and corresponding threats to competitiveness, rising inflation and the need for tighter monetary policies next year, and significant levels of political risk.

Full Employment Makes Growth Harder To Come By

Nearing Full Employment
Activity & Employment Rates
Note: Activity rate is defined as the % of the working age population employed or actively seeking employment. Source: Eurostat, BMI

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