Emerging economies in Europe continue recovery despite high inflation: Fitch

By Ovunc Kutlu

ANKARA (AA) - Emerging economies in Europe continue to recover from the coronavirus pandemic with easing restrictions and progress in vaccination, but high inflation still remains an issue, Fitch Ratings said on Wednesday.

"Inflation is rising rapidly in much of the region, with Fitch forecasting median average annual inflation at 4.3% in 2021, up from 2.7% in 2020 and the highest since 2011," the global rating agency said in a statement.

"A common factor behind the price pressure is a rapid recovery in domestic demand putting pressure on supply chains and global commodity prices. Exchange rate moves and tight labor markets have added to these pressures," it added.

The agency said supply chain issues are hitting manufacturing sectors in some European countries.

"Inflation expectations are well anchored in central and eastern Europe despite often high negative real interest rates, and policy tightening has generally begun," it added.

Fitch noted that Next Generation EU funds will provide notable benefits for growth and public finances for countries in the medium-term.