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Regional heavyweights Russia and Poland will continue to cope with the international crisis better than many other countries in the CEE, according to Nordic financial services group SEB. However, GDP growth will be modest - 4% and 3-4% respectively - and Poland is losing its regional ‘star performer’ status of recent years.

In the October 2012 issue of its twice-yearly Eastern European Outlook SEB also reports that the economic slump in these two countries has been deeper than expected: in Russia due to sagging exports, in Poland because of slowing consumption and capital spending. Both are feeling the effects of the deceleration, especially in Western Europe. However, SEB expects their slump to be temporary: during 2013, Russian growth will speed up again due to sustained high oil prices and good consumption growth, while Polish domestic demand will be sustained by falling inflation and sharply declining interest rates in recent months.

The report also highlights rising domestic demand and competitive exports across the Baltics. The Baltics' painful austerity measures of recent years were effective, restoring competitiveness and laying the groundwork for continued long-term recovery in domestic demand. However, Mikael Johansson, Head of Eastern European Research at SEB and Chief Editor of Eastern European Outlook warns the Baltics not to relax, due to relatively high wage and salary growth in Estonia, a burgeoning current account deficit in Lithuania, and high unemployment across all three countries.

In the Ukraine, the report highlights harder than expected decelerationin growth, thanks to lower steel prices hurting exports and political uncertainty. According to SEB, its economy will recover slowly sustained by consumption and because exports will be fuelled by a devaluation of at least 10% after the October 28 parliamentary election.