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2023/11/24 / Erste Group Research

Growth slowed as exports retreated

Economic activity slowed to 1.4% y/y in 1H23 as both domestic and external drivers of growth softened. High-frequency indicators indicate external weakness persisted in 3Q as well, while domestic demand likely bottomed out in 1H23. The subdued growth outlook for the Eurozone and some regional countries suggests that the negative external performance will carry on throughout the biggest part of the forecasted period. Tightening of monetary policy, both globally and locally, alongside the higher for longer narrative suggests less supportive financial conditions going forward.

Inflation decelerated from 14.7% y/y at the end of 2022 to just 4.1% y/y in September, thus showing stronger deceleration pace than previously anticipated. Upside pressures still largely stem from elevated food prices while sharply declining transport prices are working in the other way.

The general government accounts remained close to balance in 2021 and 2022, recording 0.3% and 0.4% gaps respectively. Fiscal performance in general benefited from stronger than expected revenue growth, while planned capex activity was below plan, mainly due to administrative hurdles and political stalemates.

The newly appointed government is trying to push on with the EU agenda, but the pace is still only moderate at best. EU Commission recommended the opening of EU accession negotiations, but only after the necessary degree of compliance with the membership criteria is achieved.

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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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