Research Detail
| 2021/12/09 / Erste Group Research |
Growth to normalize amid supply-side issues Recovery continues amidst biting supply-side issues. The average CPI to accelerate in 2022 to 5.1% from 4.4% in 2021. Inflation outlook supports further monetary tightening across the CEE. The base effect in fuel and food prices will take some pressure of the headline inflation in 2H22. Strong economic recovery is well underway and all but two CEE economies have reached their pre-COVID levels in real GDP. 3Q21 figures confirm the overall story of activity rejuvenation, albeit with manufacturing hit by supply-side constraints weighing down on it. Economic growth in 3Q21 was mostly driven by domestic demand, whereas net exports acted as a drag on growth everywhere apart from Croatia. Consequently, we revised our CEE8 forecast down to 5.2% this year, followed by robust increase of 4.4% in 2022. Overall, resilient labor markets, together with the gradual release of pent-up demand remain supportive of further improvements, especially in household consumption. EU funds together with the large recovery program should aid investments. More than 90% of the 4pp increase in the headline inflation observed on average in CEE throughout this year was driven by increases of fuel prices, housing and energy costs, and food prices. We expect both fuel and food prices to still positively contribute to the headline inflation at the start of next year, while the base effect in 2H22 should limit the impact of both factors. As we expect inflation to remain elevated in several large CEE economies in early 2022, the average inflation rate in CEE8 may rise from 4.4% this year to 5.1% in 2022 before easing more visibly in 2023. As inflation is expected to remain elevated next year and central banks are concerned about second-round effects, monetary tightening will continue. Until mid-2022, we see key rates at 3.5% in Czechia and Hungary, 2.75% in Romania and 2.5% in Poland. The National Bank of Serbia is expected to keep the key rate stable at 1.0%. |
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General information
| Author | Erste Group Research |
| Date | 2021/12/09 |
| Language |  |
| Product name | CEE Country Macro Outlook |
| Topic in focus | FX, Macro/ Fixed income |
| Economy in focus | CEE |
| Currency in focus | - |
| Sector in focus | - |
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