Central & Eastern Europe Economic Forecast

Economic Snapshot for Central & Eastern Europe

January 12, 2021

Regional GDP is projected to return to growth in 2021 as activity recovers from the pandemic. Household and capital spending are set to rebound, partly supported by continued fiscal and monetary stimulus, while strengthening demand from the EU should bolster exports. Uncertainty regarding the evolution of the health crisis and the deployment of vaccines clouds the outlook.

CEE Monetary & Financial Sector News

Regional inflation fell to 2.1% in November from October’s 2.3%, reflecting easing price pressures due to weak aggregate demand. Looking ahead, inflation is seen decelerating from 2020 this year, although increasing food prices and continued loose fiscal and monetary policy stances could exert upside pressures.

In their final meetings of 2020, central banks in the Czech Republic, Hungary and Poland decided to keep their key rates on hold to further mitigate the adverse effects of the Covid-19 crisis. Going forward, policy stances are projected to remain broadly expansionary in 2021 as regional economies seek to sustain the recovery.

Most regional currencies were little changed against the euro in recent weeks amid the beginning of the coronavirus vaccine rollout. However, the Polish zloty weakened as the Central Bank hinted it may cut the key interest rate in the coming quarter. Looking ahead, regional currencies overall are seen recovering some ground as activity picks up.

 

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