Research Detail
| 2022/03/10 / Erste Group Research |
War drums shaping outlook 2021 ended on a strong note, as 4Q21 delivered vivid 9.7% y/y growth, and with FY21 growth at 10.4% confirming the more than full recovery from the 2020 blow. However, all of that seems like the distant past, as the focus is on the surging uncertainty for the 2022 amid the war in Ukraine. Until we get more clarity, we took a gradual approach, focusing mostly on direct exposure to the affected region and anticipating a deteriorating domestic demand outlook. This puts our baseline at 3.4% (-1.2pp), with negative risks dominating, as spill-over effects, especially on the tourism outlook, remain uncertain, making the stagflation risk very much alive. The inflation outlook also took a turn to the south, as the war would trigger a new wave of supply-side commodity driven pressures. Consequently, we now see average CPI close to the 6% mark in 2022. Limited monetary policy effectiveness on the current inflation profile suggests an ongoing accommodative monetary stance and diligent approach in smoothing out any FX volatility. The budget gap in 2021 should eventually end below 4% of GDP, while geopolitical factors imply increased risks to the 2022 outlook. Yields adversely reflected the more hawkish ECB tones and the war triggered a riskoff mode, leading to significant repricing of both curves. |
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General information
| Author | Erste Group Research |
| Date | 2022/03/10 |
| Language |  |
| Product name | CEE Country Macro Outlook |
| Topic in focus | FX, Macro/ Fixed income |
| Economy in focus | Croatia |
| Currency in focus | Croatian Kuna |
| Sector in focus | - |
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