Eurozone: 2016 ended on a positive note
Preliminary estimates indicate that Q4 real GDP grew by +0.5% q/q, in line with expectations,. The pick-up is expected to have resulted from a boost to new export orders thanks to a weaker EUR, increasing prices which supported firms’ turnover, and a recovery in employment which supported private consumption. Confidence in the manufacturing sector registered its highest quarterly performance of the year which suggests that private investment continued to improve in Q4. Details by countries will be available on 14 February but advance estimates show accelerating growth in France and Belgium and steady growth in Austria and Spain In 2017, we expect Eurozone GDP growth to remain relatively stable at +1.6%. Despite high uncertainty due to the Brexit process and upcoming elections, the ECB safety net should help maintain resilience. We estimate that elections could cut up to -0.1pp from growth in France and Germany, -0.2pp in the Netherlands and -0.3pp in Italy.

Greece: All eyes on the IMF participation in the bailout
The Eurogroup meeting held last Thursday has :
(i) announced the formal adoption of the short-term debt relief measures that should help reduce Greek debt by 20pp by 2060 from186% of GDP in 2016;
(ii) concluded that there are enough positive drivers (positive growth in 2016, higher fiscal revenues) for a finalization of the second Troika review that will allow the disbursement of the next aid tranche. How- ever, an agreement on the policy reform package and the medium-term targets between the Europeans and the IMF is still needed. On 6 February, the IMF Board will conclude the Article IV consultation with Greece and should make a decision on its participation in the third bailout. This is important for the EU countries that continue to judge the IMF participation as “non-negotiable” and will allow the ECB to buy Greek bonds through its QE program. Markets have stressed the importance of the IMF being on board (10-year bond yields up by more than 80bp since the Eurogroup meeting) as a matter of restoring sufficient confidence for Greece’s return to the bond markets post 2018 when the bailout will end. The next Eurogroup meeting is on 20 February.

Chile: By the warmth of copper
The Central Bank lowered its key policy interest rate in January and markets anticipate a further cut of the same magnitude during the first semester in order to spur growth. Inflation continued to moderate after the short-lived rebound that took place in November. Consumer prices and in December, bringing down inflation below the 3% target. Copper prices increased by since September, after five years in negative territory driven by abating demand from China, and could catalyze Chilean production to gain momentum. Euler Hermes forecasts real GDP to increase In 2017, slightly better than the +1.7% estimate for 2016 but well below the average recorded in the previous decade. The sluggish economy has deteriorated confidence in the government and fuelled rising social discontent that could be decisive in the presidential and parliamentary elections that are scheduled to be held on 19 November.

Poland: Slowdown in 2016. Stabilization in 2017?
Preliminary estimates show that real GDP growth decelerated markedly to in 2016 from in 2015, in line with our forecast. Demand-side details are only partly available as yet but indicate that growth was almost entirely driven by domestic uses while net exports made only a tiny positive contributionPrivate consumption grew , up from in 2015. However, fixed investment dropped byin 2016, after it had increased by +6.1% in 2015. But a strong rise in inventories reduced the decline in overall investment to
in 2016. Data for Q4 are not provided as yet, but the full-year figure suggests that Q4 growth was similar to the posted in Q3. Euler Hermes expects a stabilization in 2017 and forecasts full-year growth of as domestic consumption should remain robust while investment activity should gradually recover thanks to an increased utilization of EU funds.

Saudi Arabia: Tepid growth to continue in 2017
Preliminary data indicate that the economy expanded in 2016, Non-oil growth was particularly weak in 2016 due to government spending cuts and payment arrears to domestic contractors and service providers. However, there are signals pointing to a gradual rebound at the end of the year. The PMI for the non-oil private sector rose to a four-month high of 55.5 in December, perhaps reflecting that the government has begun to reduce its payment arrears. And the oil sector has benefitted from rising prices. EH expects the non-oil sector to continue to recover moderately in 2017 while output in the oil sector will be curtailed by the OPEC-agreed production cuts, which Saudi Arabia is expected to comply with. Overall, we forecast GDP growth to remain tepid at +1.5% in 2017. Meanwhile, inflation has fallen to a more than 10-year low of in December on the back of dropping food prices, but it should soon rise again as base effects fade.