The ECA region faces numerous risks, including possible intensification of geopolitical tensions, persistent low commodity prices, and weakening remittance flows. A new shock associated with the U.S. interest rate tightening cycle could lead to less favorable external financing conditions.
Overall, risks appear to be weighted on the downside, and could undermine expectations of continuing moderate growth, improving public finances, and firming external accounts. Several countries in the region face significant geopolitical risks. How large are the potential intra-regional spillovers from the region’s two largest economies, Russia and Turkey?