Central & Eastern Europe Economic Forecast

Economic Snapshot for Central & Eastern Europe

September 30, 2020

Central & Eastern Europe growth to lose traction in 2020

The regional economy will be hard hit by the health crisis this year. A marked increase in the jobless rate and weaker wage dynamics will hammer consumer spending, while investment activity will shrink due to vanishing foreign demand, businesses closures, disrupted supply chains and elevated uncertainty ahead. Possible flare-ups of the pandemic cloud the outlook.

CEE Monetary & Financial Sector News

Regional inflation slumped from 3.4% in March to 2.5% in April, on falling energy prices. This year, inflation is set to cool considerably from 2020 on the back of wider output gaps, lower global oil prices and subdued wage pressures. That said, disrupted supply chains, rising food prices and extremely loose fiscal and monetary policy stances could deliver upside surprises.

At its latest meeting, the National Bank of Poland cut rates to a new all-time low and reaffirmed its quantitative easing program. Meanwhile, the Central Bank of Romania slashed rates and confirmed liquidity measures, while Hungary’s Central Bank stayed put on rising optimism about the recovery. This year, policy stances will remain firmly expansionary.

Over the last few weeks, most local currencies have gained considerable ground against the EUR. Investors’ risk appetite strengthened on vaccine hopes and as easing lockdown measures fueled expectations that the worst of the fallout from Covid-19 may have passed. Going forward, regional currencies should hover around current levels.

 

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Central & Eastern Europe Economic News

  • Czech Republic: Economic sentiment weakens further in November

    November 24, 2020

    The economic sentiment indicator, published by the Czech Statistical Office (CSO), fell to 82.0 in November (October: 86.4), marking the weakest reading in five months. The business confidence index decreased in November, coming in at 81.7, down from October’s 86.5 reading.

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  • Hungary: Economic sentiment weakens in November

    November 23, 2020

    The GKI economic sentiment index, a composite indicator, dropped to minus 23.7 in November from minus 18.8 in October.

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  • Hungary: MNB keeps monetary policy unchanged in November

    November 17, 2020

    At its meeting on 17 November, the Monetary Council of the Hungarian National Bank (MNB) decided to keep the base rate unchanged at the all-time low of 0.60%, and also held all other instruments steady, which was in line with market analysts’ expectations. The MNB’s decision to hold fire represented a balancing act to sustain the economic recovery while keeping inflation in check.

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  • Bulgaria: Economy contracts at milder rate in the third quarter

    November 13, 2020

    According to a flash estimate, GDP declined 5.2% year-on-year in the third quarter—a softer drop than the second quarter’s 8.6% slump—as the gradual lifting of Covid-19 containment measures enabled some recovery in activity.

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  • Hungary: Economy rebounds strongly in Q3

    November 13, 2020

    According to a preliminary reading released by the Hungarian Central Statistics Office on 13 November, economic activity rebounded strongly in the third quarter, with GDP jumping 11.3% on a seasonally-adjusted quarter-on-quarter basis.

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