Research Detail
| 2023/09/12 / Erste Group Research |
Sluggish recovery path Croatia and Romanian outperforms the peers in terms of economic development this year.Moreover, Croatia leads in terms of post-pandemic economic recovery. On the other hand, Hungary is expected to be in recession this year, while Czechia and Poland are at the edge of it. These countries experienced the negative year-on-year growth dynamics in the first half of 2023 and the recovery pace in the reminder of the year is likely to be slower than previously expected. Our 2024 CEE average growth forecast at 2.8% (up from 0.7% ithis year) bears the downside risks, however, as external environment seems to recover at much slower pace than intially expected. Expectations for German economy to contract in 2023 weigh on the CEE outlook in particular. At this point, we see improving global environment and private consumption regaining strength as the main growth drivers in 2024. Household's level of spendings should be supported by the real wage growth, easing inflation and declining interest rates. Investment activity,on the other hand, may suffer as countries switch to new budgeting period in drawing EU funds. 2024 will be first year of financing from new budgeting period 2021-27. As new projects need to be prepared and applied for, we expect drop in investment activity in region. Dynamic decline of inflation warrants monetary easing in whole region. Hungary is already in process of interest rate normalization (we expect one-day deposit rate and key interest rate to be merged at 13% in Septemebr) while Poland surprised with 75bp cut in September. Czechia is expected to cut interest rate in 4Q23 and Serbia at beginning of 2024. Romania expected to only begin monetary easing in mid-2024. CEE currencies have lost strength from beginning of year and were shaken by surprisingly large rate cut by Polish central bank. Polish zloty lost more than 3% vs. euro since decision on September 6, not only because of cut itself, but also due to speculation that front-loading of monetary easing shortly before October elections has been politically motivated, undermining independence of central bank. Furtehr, concerns about economic performance, weak sentiment and expected monetary easing in region support downward trend of long-term yields. |
 Download PDF (1.2MB)
|
General information
| Author | Erste Group Research |
| Date | 2023/09/12 |
| Language |  |
| Product name | CEE Country Macro Outlook |
| Topic in focus | FX, Macro/ Fixed income |
| Economy in focus | CEE |
| Currency in focus | - |
| Sector in focus | - |
| Download |