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The countries of New Europe continue to grow at a robust rate with low inflation. The latest economic data reveal a strong real GDP growth for 2006, ranging from 5.2% (Poland) to 7.8% (Romania). This growth is driven primarily by private consumption and gross fixed capital formation. On the inflation front, the news is equally good. Despite the rapid expansion of aggregate demand, inflation has either remained subdued (Poland) or declined (Bulgaria, Romania, Serbia). Only Turkey and Ukraine have faced a resurgence of inflationary expectations, but both cases were instigated primarily by external developments.