Economic situation in Central and Eastern Europe

— Press release —

Despite the easing of restrictions in 2021 and corresponding solid growth in the regional economies of Central and Eastern European countries, the ongoing pandemic remains a major risk to the outlook. The regional inflation rate rose from 4.3 per cent in July to 4.8 per cent due to the increase of price pressures in all countries of the region. The rise in raw materials and energy prices has started to affect countries, where manufacturing sector has a significant share of GDP. The Czech Republic, Slovenia, the Slovak Republic and Hungary are particularly affected. According to EBRD data, households in the region have already spent on average more than 15 per cent of their income on utilities, which is higher than in advanced European economies. In Germany, for instance, the corresponding figure is around 7 per cent. Supply chain disruptions have a negative impact on growth in some economies as well. EBRD economists expect a slowdown in the region to 4.7 per cent in 2022.

Poland

Economic activity continued to increase in the third quarter at a steady pace. Exports recovered quickly, while domestic demand accelerated imports even faster. Rising prices for utilities and a shortage of industrial components, together with growing domestic demand, led to inflation that reached 5.9 per cent in September. GDP growth of 4.9 per cent is forecast for 2021 and 4.8 per cent for 2022.

Slovakia

German companies rate the business situation in Slovakia as attractive, apart from the expected economic situation. According to the results of an analysis by the tax consulting firm BMB Partners, German companies have the highest share of tax revenue among the 300 largest companies in the country. However, the drawbacks should be considered. A shortage of skilled workers is one of the main challenges for German companies, which is causing the increase in wages and salaries.

According to EBRD forecasts, GDP growth in 2021 is estimated at 4.0 per cent, rising to 5.0 per cent in 2022.

Hungary

The inflation rate reached 5.5 per cent in September. Higher energy prices combined with global supply constraints are negatively impacting Hungary's manufacturing sector. The post-crisis recovery is expected to be supported by investments co-financed by EU funds. GDP growth is going to remain 7.7 per cent in 2021 before falling to 4.8 per cent in 2022.

The Czech Republic

Economic growth may accelerate in 2022 as the effects of the pandemic fade and remaining restrictions are lifted. FocusEconomics analysts expect GDP growth to be 4.6 per cent in 2022 and 3.6 per cent in 2023.

Romania

Although GDP growth may slow next year, it will be stable as further easing of Covid 19 restrictions boosts domestic activity and external demand. According to analysts at FocusEconomics, the economy will grow by 4.8 per cent in 2022 and 4.0 per cent in 2023.

(Source: Committee on Eastern European Economic Relations, EBRD, FocusEco)