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2023/03/15 / Erste Group Research

Sluggish growth and dynamic disinflation

The good news is that we no longer expect full-year recession. However, the 2023 growth is set to slow to 0.9% on average, due not only to underlying weakness, but also strong base effects. In 2023, private consumption will remain a factor dragging the growth down, while investment should be supported by the flow of EU funds. The Economic Sentiment Indicator suggests that the bottom of the slowdown was most likely reached in the last quarter of 2022. The revival has been rather sluggish, though. The q/q growth dynamics should accelerate in the second half of the year more visibly.

The average inflation will likely remian double-digit at 11.9%. We expect dynamic disinflation toward year-end driven by external factors. Decline of headline inflation should enable monetary easing in the second half of the year and support yields moving south. The tight labor market poses a risk to underlying demand pressures, however, as it strengthens employees in the wage bargaining process. Inflation of services seems to have been on the rise since mid-2020 that seems to confirm wage pressure. Elevated core inflation may thus become a factor delaying rate cuts.

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General information

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


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