Central & Eastern Europe Economic Forecast

Economic Snapshot for Central & Eastern Europe

January 14, 2020

Central & Eastern Europe growth  is seen shifting into a lower gear this year

The regional economy is seen shifting into a lower gear this year, due to spillovers from a weak Eurozone amid lingering global trade tensions, and as capacity constraints bite harder. Investment activity is set to lose the most steam, while consumer spending should also ebb on softer employment growth and despite still-healthy wage gains

CEE Monetary & Financial Sector News

Regional inflation came in at 2.8% in November, increasing from October’s 2.6% reading. This year, inflation is expected to remain stable compared to 2019, with the impact of tightening supply-side constraints largely offset by softening domestic demand.

Central banks in the Czech Republic, Hungary, Poland and Romania held their ground at their latest meetings. The ECB’s ultraloose monetary policy stance, softening growth at home and protracted weakness in the Eurozone were behind the banks’ decisions. Rates should remain largely stable this year, provided inflation does not surprise on the upside.

Over the last month, the Czech and Polish currencies strengthened relative to the EUR, likely supported by the trade agreement reached between China and the U.S., while the Romanian leu remained stable and the Hungarian forint depreciated, weighed down by domestic factors. This year, on the whole CEE currencies are seen largely unchanged against the EUR.

 

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