Europe and Central Asia Economic Update, Spring 2019 : Financial Inclusion

ABSTRACT
With slowing global growth and increasing uncertainty clouding the global economic prospects,the Europe and Central Asia region faces a more challenging context than previously envisioned.Growth in the emerging markets and developing economies in the region slowed to 3.1 percentin 2018 and is projected to decline to 2.1 percent in 2019. What challenges does the region face inthe coming year? What are some of the risks to the macroeconomic outlook? In the long run, howshould policy makers design policies that boost growth and help individuals and firms adjust tothe interplay between globalization and technological change? In the global context, this updatesummarizes the recent developments and outlook for the region. It also focuses on financial inclusion, as one of the important policy areas that can promote long-term growth, reduce poverty, and enhance resilience to shocks. The aggregate growth figures mask the diversity of performance across the region. Regional growth was hindered by marked weakness in Turkey amid substantial financial market stress despite strong growth in other parts of the region, such as Central Europe, the Western Balkans, the Russian Federation, and Central Asia. Regional growth is expected to pick up modestly in 2020–21, as a gradual recovery in Turkey offsets moderating activity in Central Europe. Key external risks to the region are spillovers from weaker-than-expected activity in the euro area, as well as the escalation of global policy uncertainty, particularly in trade. Renewal of financial pressures in Turkey, combined with possible contagion to the rest of the region, could also disrupt growth in the region. The possibility of sharp declines in energy prices presents a downside risk to the region’s energy exporters, such as Azerbaijan, Kazakhstan, and Russia.