Page 9 - CE Outlook Regions 2024

of 53 in the 100-member parliament. Nevertheless, in December the centrist government managed to ratify the contentious Istanbul Convention on violence against women, leaving Lithuania as the only holdout among the Baltic states.
Slow crawl back to growth
Central Europe is emerging slowly from the cost of living crisis and slowdown triggered by the Russian invasion of Ukraine. Czechia and Hungary experienced recessions over 2023 and growth elsewhere was feeble.
This year the region is expected to outperform the Eurozone, though growth will still be undistinguished. Forward-looking indicators such as purchasing manager indices (PMIs) in Poland and Czechia remain negative and have been so for a year and a half.
Consumption is now gradually reviving as the historically high inflation rates fall sharply. This is enabling central banks to cut interest rates, which in turn reduces mortgage payments, supporting consumption. Unemployment remains low, and real wages – which fell across the region in 2023 – are now only negative in Czechia and Slovakia.
The uncertain geopolitical environment, the interruption of supply chains, together with high interest rates and energy prices, have kept investment low. This year investment is expected to recover as interest rates fall, foreign direct investment rises and the region starts to receive more EU money from the Recovery and Resilience Facility.
On the negative side, Eurozone growth is now weakening, which will depress exports, and companies will be running down their huge inventories. At the same time, many countries are launching austerity packages to close deficits swollen by post-pandemic spending, which will turn the impact of the public sector negative.
The region’s worst growth performer is Czechia, the only EU economy that has still not recovered to its pre-pandemic level. Czech gross domestic product (GDP) fell back again in the third quarter, decreasing by 0.8% year on year and by 0.6% quarter on quarter. The Czech National Bank (CNB) has worsened its outlook, expecting an overall GDP drop by 0.4% for 2023 and growth of only 1.2% for 2024.
Hungary’s performance has also been dreadful. The recession there ended in Q3 2023 after four consecutive quarters of contraction, the longest decline since 1995. The Hungarian National Bank in December revised its 2024 GDP target downward to 2.5-3.5%. The economy should benefit this year from booming foreign direct investment (FDI), which doubled in 2023 to €13bn, but it is still suffering from the lack of EU funds, which have been frozen over the Orban regime’s violations of
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