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2022/12/14 / Erste Group Research

Growth set to slow in 2023

Recovery after the pandemic continued in 1H22, as real GDP rose 5.8% y/y. Component-wise, domestic demand was key. Investments surged 24% y/y due to infrastructure works while private consumption rose 3.5% y/y driven by double-digit rise in nominal wages and higher remittances. Second-round effects of the war have started to weigh on overall activity, suggesting slowdown of growth in the near-term.

Inflation is rippling through the economy, rising 13.7% y/y on average in 10M22, with the October figure reaching 17.4% y/y. Food prices continue to soar, rising 20.9% y/y in the same period, thus contributing to roughly 50% of headline inflation. In our opinion, prices should peak in 4Q22, remain high in 1Q23, and then gradually ease. Still, inflation is expected to remain above average historical levels throughout the forecasted period.

Energy crisis is, among other things, aggravating external imbalances. C/A deficit widened by 1.1pp to 3.4% of GDP after 1H22 (on a 4Q rolling basis). The trade balance gap is expected to rise by 2pp for the whole year, amounting roughly 20% of the GDP, pushing the FY22 C/A gap to 4.7% of the GDP. We expect imbalances to peak next year before some improvement in 2024.

Fiscal data were revised, substantially increasing the consolidated fiscal deficit in 2020. The latest data suggest a consolidated gap of 5.1% of GDP in 2020 and just -0.3% of GDP gap last year. This year, stronger tax revenues supported by high inflation, partly offset higher spending. Overall, we expect a moderate gap of around 0.5% of GDP for the whole year, thus allowing further decrease of the public debt trajectory.

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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-


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