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2022/06/15 / Erste Group Research

Growth will moderate as energy crisis deepens

Despite better-than-expected growth last year, the economy remains below pre-pandemic levels, and now with the onset of the energy crisis, growth figures are once again being revised to the downside.

1Q22 GDP landed at 2.4% y/y, thus confirming relatively lackluster growth dynamics. Investments were the key driver early in the year, partly due to base effects, followed by consumption and inventory build-up. Net external demand weighed heavily negative on overall growth in 1Q22. Bottom line, we trim this year’s GDP forecasts by 0.7pp to 2.8% before gradual acceleration to 3.2% in 2023.

A combination of factors are exerting upward pressure on prices: surging energy and food commodity prices as well as supply and logistics bottlenecks, both originating from Covid-times but further aggravated by the outbreak of war in Eastern Europe. We forecast average CPI in double-digit area this year before cooling down to around 5% y/y in 2023.

As we expected the general government budget gap last year was below budgeted (5.4% vs 6.5% of the GDP) due to buoyant revenue performance and a 20% underperformance in planned CAPEX. Due to the ongoing energy crisis, rise in the minimum wage as well as new indexation formula for pension calculation, we forecast the budget deficit will remain elevated above 5% of the GDP thus postponing fiscal consolidation efforts.

The bilateral dispute with Bulgaria remains the number one political topic in the country. Bulgaria, which has been blocking the opening of EU negotiations since late 2020, continues to insist North Macedonia must meet several demands before lifting the blockade.

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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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