To attribute Russia’s record growth rates solely to the high oil price would be missing the point. The private service sector and, above all, the construction sector are booming and the government is pushing ahead with the diversification of the economy by investing heavily in infrastructure, education, and R&D. The aim is to shield the economic upswing from lower commodity prices. And fears that political uncertainties might prompt foreign investors to steer clear of the country have proved unfounded – on the contrary: measured in terms of the size of its economy, Russia last year received substantially more direct investment than India, China or Brazil.

Russia is still widely seen abroad as not particularly attractive as an investment location, not least due to the fragile legal system and political intervention in the economy. However, the numbers tell a completely different story.

The economic outlook for Russia, Poland, the Czech Republic and the Slovak Republic remains favorable despite the worsening of the global backdrop. Only Hungary is still struggling to emerge from the doldrums. However, the steep rise in inflation is a matter for concern in all countries.

Overall populations in CEE countries and especially the working-age population will decline significantly by 2050. Over the coming decades those in work will have to support a sharply rising proportion of retirees. This will be mitigated somewhat by the fact that in CEE countries the old, pay-as-you-go financed pension schemes have been replaced by more modern multi-pillar pension schemes with substantial funded elements. Apart from pension spending, ageing populations also push up costs for health and long-term care, too. On the other hand, the CEE countries have a high growth potential and for the next 25 years this will probably more than offset the adverse effects due to demographic change. But from 2030 a significant drop in the labor pool will have a negative impact on growth potential.

Russia’s economic upswing is gathering momentum and has broadened substantially. This comes at a time at which attention is again increasingly focused on the risk of self-isolation and government meddling in Russian economic policy. But in view of Russia’s current rapid economic integration with the rest of the world, as reflected in foreign trade and capital transactions, we believe that such fears are overdone and that Russia’s path to the market economy is irreversible.

Portugal should serve as a warning for the eastern European EU countries. Portugal’s economy has been struggling to get back on its feet for years.

Given soaring oil prices, Russia’s successes on the export front are not particularly surprising. What is surprising, however, are the large trade and current account surpluses given that Russia desperately needs substantial imports of capital goods to cover its investment needs.