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2022/05/20 / Erste Group Research

A lot of question marks but few answers

Just as the risk of COVID-19 slowly fades away, escalation of conflict between Russia and Ukraine brings a fresh bout of risk aversion. The economy managed to bounce back nicely last year, but growth forecasts are once again being revised to the downside as question marks again linger over the outcome of this year’s tourist season.

We have slashed our growth forecast by 1pp to 4.8% y/y for 2022. Private consumption will support growth due to surge in wages while the expected loss of tourists from Eastern Europe (20% of total foreign visits) will be hard to replace. Weak business sentiment and high PPI limit the extent of projected investment recovery.

As the war in Ukraine severely constrains this year’s global harvest output and puts a squeeze on global energy markets, prices are likely to stay elevated for the better part of the year. Hence, we revised our average CPI forecast upwards by almost 6pp since our last report (8.8% y/y).

Tourism-related windfalls also eased fiscal concerns. Revenues were 1.8% higher and outflows 2% lower than planned thus enabling a general government budget gap of just 1.9% of the GDP in 2021. The MoF plans the FY22 budget gap at around EUR 268mn but given encouraging early results since the fiscal reform we expect a more positive outcome.

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General information

AuthorErste Group Research
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focus-
Currency in focus-
Sector in focus-


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