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bne August 2023 New Europe in Numbers I 61
Balkans lift otherwise gloomy Emerging Europe outlook for 2023
Clare Nuttall in Glasgow
Southeast Europe is set to be the fastest growing sub-region in the Central, Eastern and Southeast Europe (CESEE) areas this year, amid a generally gloomy picture for the wider region, the latest forecasts from the Vienna Institute of International Economic Studies (wiiw) show.
The report points out that after the initial “impressive resilience” shown by economies from the region in response to the economic repercussions of
the conflict in Ukraine, they are now encountering challenges. Persistently elevated inflation, stricter monetary measures and a feeble global landscape are collectively exerting significant pressure on the economies of this region, wiiw said.
German contagion
Following a lacklustre performance
in the fourth quarter of 2022, the economic growth in several countries of the region came to a halt in the first quarter of 2023. Poland, Czechia and Hungary started the year with negative growth.
Vasily Astrov, senior economist at wiiw and the primary author of the Summer Forecast released on July 5, attributes the economic slowdown in the region to a combination of declining real incomes, the recession in Germany and elevated energy prices.
The negative impact on the Visegrad countries is especially notable, as
they have strong economic ties
with Germany, though Southeast European economies such as Bosnia
& Herzegovina, North Macedonia and Slovenia also send a large share of their exports to Germany.
Looking ahead to 2023, wiiw predicts a slowdown in growth, with an average of 1.2% for EU member countries in
the region. However, this is still more than twice as fast as that of the euro area, which is expected to come in at just 0.5%.
Southeast Europe stands out
Among the EU members in Southeastern Europe, Romania (3.0%) and Croatia (2.5%) are projected to have relatively strong growth. Similarly, the Western Balkan economies of Montenegro (3.5%), Kosovo (3.4%) and Albania (3.3%) will have some of the fastest growth rates in the region.
“The Southeast Europe sub-region is doing better than some other parts
of Central, Eastern and Southeast Europe. In most sub-regions we are covering, there has been an aggressive deceleration in growth on an annual basis that continued in the first quarter of this year,” said Astrov during a webinar to present the report on July 5.
“Southeast Europe is actually holding up pretty well. Both the Western Balkans and EU member states, especially Romania and Croatia, are
doing better in terms of growth than the other eastern EU member states.”
He attributes this to the large inflows of EU funds, especially under the Recovery and Resilience Facility (RRF), booming tourism and inflows of foreign direct investment (FDI).
The fastest growing economy this year is expected to be Kazakhstan (4.5%), the only country from the Eurasia region included in the report.
On the other hand, the Visegrad countries are expected to see only modest expansion at an average of 0.6%. Although most countries in the region, except Hungary (-0.5%), are anticipated to avoid a full-year recession, they will still face a significant decline in growth in 2023 compared to the previous year.
Growth in Russia and Ukraine was still negative in Q1 but less negative than in 2022, after both economies absorbed the initial shocks of war and sanctions. Modest positive growth is anticipated this year.
Source: wiiw
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