Page 11 - CE Outlook Regions 2024

the impact of soaring energy prices. This year three out of the four Central European governments are likely to enter the EU’s Excessive Deficit Procedure for running deficits of more than 5% of GDP, well above the 3% threshold. The traditionally more austere Baltic states, meanwhile, are all expected to run deficits close to 3% of GDP.
The Czech and Hungarian governments have already begun tightening fiscal policy but Hungary’s problems are so dire that the deficit could still hit 5% of GDP this year. Czechia should manage to keep its deficit to around 2.8% of GDP, avoiding EU scrutiny.
Poland and Slovakia, meanwhile, are not even attempting to cut their deficits, as the new governments fulfil their election promises. The Polish budget deficit could hit 5.7% of GDP this year, while the Slovak figure is likely to be even worse at 6.3% of GDP, according to the European Commission. In December, international rating agency Fitch Ratings lowered Slovakia’s credit rating from ‘A’ with a negative outlook to ‘A-’ with a stable outlook.
These figures are particularly worrying given that all the governments will need to spend more on ramping up defence, on pension and health systems as populations age, and on switching their economies onto a green and higher value-added track in order to restart convergence with Western Europe.
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