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2022/12/05 / Erste Group Research

Energy crisis slows growth

High frequency indicators point to further deceleration of economic activity over the summer. Disruptions related to the war in Ukraine, fragile supply chains, persistent inflation due to the energy crisis and low consumer and business sentiment remain key risks factors. We have accordingly slashed our expectations for this year and next, now expecting average GDP growth at 2% and 1.7% y/y respectively, before accelerating to 3.3% y/y in 2024.

Inflation continues to soar reaching an alarming 19.8% y/y in October. While in 10M22 food prices jumped 19.2% y/y, in October they rose 31.2% y/y thus accounting for almost two thirds of overall inflation. Energy prices are expected to stabilize next year, albeit gradually, hence next year’s average CPI will remain elevated.

Central bank started tightening in April lifting the policy rate by 225bps to 3.5% in October, while keeping the peg intact. Second round effects of the energy crisis also mean fiscal consolidation was postponed all the way to 2024.

In June Bulgaria's parliament approved lifting the country's veto on opening EU accession talks with North Macedonia while in July the Assembly of North Macedonia also approved the revised French proposal, allowing accession negotiations to begin. Hopefully the country’s unlocked EU perspective may spur reform tempo, accelerate growth and bolster fiscal discipline.

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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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