Page 4 - Central & Southeast Outlook 2020
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Central Europe Executive summary
Through most of 2019, the Central European economies successfully weathered the slowdown in the main West European countries, in particular the region’s largest economy Germany, maintaining high growth rates.
Rather than exports, the growth rates were propped up primarily by private consumption, stemming from the tightening labour markets that have resulted in strong upward wage pressure and falling unemployment, leading to growing spending power.
Towards the end of 2019, however, there were signs that these drivers will not continue to lead to high growth rates indefinitely.
Forecasts for 2020 from international financial institutions (IFIs) are for somewhat slower growth than in 2019, though still at healthy rates. Poland (covered in a separate report) and Hungary are expected to remain the regional leaders among the Visegrad economies, while growth will be somewhat slower in the Czech Republic and Slovakia.
The international economic slowdown, driven partly by trade tensions especially between the US and China, is felt in Central and Eastern Europe (CEE) via the car industry, which accounts for a significant share of exports in several countries.
“In several of the Central and Eastern European Member States their value added created by car exports stands out, creating specific vulnerabilities,” commented the European Commission in its 2019 Autumn Forecast.
The European Bank for Reconstruction and Development (EBRD) also points to the contraction in the automotive sector, amid a general slowing in global industrial production. “Given its deep integration in ‘factory Europe’ and the importance of the automotive industry for the regions’ economies, emerging Europe is highly vulnerable to weakness in the automotive sector and a further slowdown in Germany,” the EBRD said in November.
Central — and increasingly now Southeast — Europe have benefited from outsourcing of manufacturing and business processes, as the two regions have lower costs than Western Europe while offering skilled workforces. However, the EBRD questions how long this model can continue, as "Technological change weighed on inflows of foreign direct
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