Look for:


Research Detail

2021/11/24 / Erste Group Research

Political instability clouds outlook

After a weak start to 2021 growth bounced back in 2Q rising 13.1% y/y, thus averaging 5.2% y/y growth in 1H21. Growth was underpinned by revived domestic demand developments, notably unleashed household consumption, while net external contribution to growth was negative. High-frequency indicators suggest slowdown of growth in 2H21.

Stubbornness of the pandemic, supply-side bottlenecks affecting the global car industry and elevated local political uncertainty weighing on investments are factors behind our decision to slightly trim this year’s and next GDP growth forecasts. Bottom line, we trim this year’s and next GDP growth forecasts by 0.3pp and 0.6pp respectively to 3.5% before rising to 4% in 2023.

Supply side pressures intensified considerably recently. After averaging 3.5% y/y in 3Q, CPI surged to 4.1% y/y in October. The increase was primarily driven by electricity, fuel and food prices. We have revised our average CPI forecast for the year to 3.1% y/y, followed by 2.6% y/y and 1.6% y/y in 2022 and 2023 respectively.

Although the government revised up its budget deficit target to 6.5% of GDP, we forecast the end figure will be below 6% of the GDP courtesy of decent revenue growth and under-execution in planned public investment, especially likely in the last quarter reflecting political wrangling. The government plans to cut the deficit to 3.5% of the GDP by 2023 but consolidation measures remain unclear.

Political uncertainty has increased following a bad result on local elections for the ruling Social Democrats. After a failed attempt by the opposition to oust the government, the ruling parties are busy trying to bolster their shaky support base in parliament. The blockade by Bulgaria continues to hamper EU accession path.

PDF Download Download PDF (294kB)

General information

AuthorErste Group Research
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focus-
Currency in focus-
Sector in focus-


We use cookies and web analysis software to give you the best possible experience on our website. If you consent, these tools will be used. Please read more information here


Any information, material and services regarding financial instruments and securities provided by Erste Group Bank AG or any of its affiliates (collectively “Erste Group“) on this and any linked website hereafter (jointly the “Websites”) shall be exclusively to investors who are not subject to any legal sale or purchase restrictions (the “Interested Party“).

The publication and distribution of information as well as offering and selling of products and services described on the Websites is prohibited by law in some jurisdictions. For this reason, persons in countries in which the publication as well as the offering and selling of products and services described on the Websites are not permitted by law, must not enter the Websites and/or acquire the products displayed on the Websites.

Neither Erste Group nor any third party shall offer access to the Websites or offer the products to especially, but not limited to citizen/residents of the United States and “U.S. person” (as defined in Regulation S under the US Securities Act 1933 as amended), citizen/resident of Australia, Canada, Great Britain and Japan. For this reason, the distribution or redistribution of the information, materials and products into United States, Australia, Canada, Great Britain and Japan or into any other jurisdiction where it is not permitted under the applicable law, as well as to the citizens/residents of these countries shall be prohibited.

The securities displayed on the Websites have not been and will not be registered under the US Securities Act of 1933 and trading in the securities has not been approved for purposes of the US Commodities Exchange Act of 1936. For this reason the securities may, inter alia, not be offered, sold or delivered within the United States or, for the account and benefit of U.S. persons.

The Interested Party is solely responsible to examine, whether he may enter the Websites under the law applicable to it. Erste Group shall not be responsible for the distribution of content of any of the Websites to individuals or entities which provide false information about their right to enter the Websites. For this reason Erste Group shall not be liable for any legal claims or damages which may result from the unauthorized entering or reading of the Websites.

By agreeing to this hereto, the Interested Party confirms that
(i) It has read, understood and accepted this Information and the Disclaimer;
(ii) It informed itself about any possible legal restriction and warrants that it is not restricted or prohibited to enter the Websites according to any law applicable; and
(iii) It does not make available the contents of the Websites to any person who is not qualified by law to enter the Websites.
(iV) It is no consumer.