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2019/06/14 / Erste Group Research

What’s up in CEE? – 2Q19

1Q19 growth in CEE still looked good but slowdown could be only postponed. Local core inflation getting higher but external inflation environment is very low. GDP growth helps headline fiscal numbers, structural figures less favorable.

Despite the fact that we discussed in our last What’s Up in CEE publication that a slowdown for this year looks very likely, courtesy of external demand headwinds, real GDP growth was surprisingly fast in several regional countries in 1Q19. Strong growth in the first quarter led us to revise real GDP expectations for the full year to 4.8% for Poland and to 4.5% for Hungary and Romania, while we slightly revised growth to the upside for Croatia and marginally for the Czech Republic as well.

Looking ahead to the coming quarters, domestic demand is likely to remain in high gear, but its strength could wane somewhat. Wage growth is to remain solid, given the still very tight labor market situation everywhere, but some slowdown cannot be ruled out, given the high wage dynamics recently. Inflation is also slowly going up (seen at 2.7% this year on average for CEE, from 2.4% last year), eating away an increasing share of wage growth.

As for external demand, the picture remains much less rosy. It is not just that German growth (the main export partner of many CEE countries) could remain rather slow, but new risks have started to appear on the external landscape. As for global car manufacturing, negative news and fears of a notable slowdown seem to be intensifying, mostly tied to news coming from China.

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General information

AuthorErste Group Research
Product nameCEE Economies Special Report
Topic in focusFX, Macro/ Fixed income
Economy in focusCroatia, Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia, Slovenia
Currency in focusCroatian Kuna, Czech Koruna, Euro, Hungarian Forint, Polish Zloty, Romanian Leu, Serbian dinar
Sector in focus-


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