Monthly Report No. 7-8/2021

Light at the End of the Tunnel? Economic Forecasts for Eastern Europe for 2021-23 CESEE’s economic results from Q1 2021 were better than expected, despite a severe wave of the pandemic. This suggests that the economies are learning to live with COVID-19. The pandemic is far from over, and a new wave is likely to strike in autumn, but we do not expect it to wreak such economic damage as the previous waves. We are thus upgrading our GDP growth forecasts for 2021 for 20 of the 23 CESEE economies, and expect the region as a whole to grow by 4.2% on a weighted average basis, more than compensating for the setback of last year. Inflation is back, caused primarily by higher global energy and food prices. Although we regard it as largely transitory, six CESEE countries have already tightened their monetary policy in response, and several more are likely to follow suit. Regional Overview by Branimir Jovanovic Country updates Albania Public investment and tourism will boost growth further by Isilda Mara Belarus Further reorientation towards Russia by Rumen Dobrinsky Bosnia and Herzegovina Recovery under way, but concern over sluggish vaccination campaign by Selena Duraković Bulgaria Recovery amidst political uncertainty by Rumen Dobrinsky Croatia Economic rebound in sight by Bernd Christoph Ströhm Czechia Recovery delayed by Leon Podkaminer Estonia Sprinting to recovery by Maryna Tverdostup Hungary Change in monetary policy with rising inflation by Sándor Richter Kazakhstan Recovery gains momentum, but could falter in the event of pandemic resurgence by Alexandra Bykova Kosovo Outlook for growth improves, with robust domestic and external demand by Isilda Mara Latvia Public finances providing strong support for the recovery by Sebastian Leitner Lithuania Strong revival in growth following last year’s mild recession by Sebastian Leitner Moldova Rapid recovery and the chance to find an anchor with the EU by Gábor Hunya Montenegro Struggling to recover properly from last year’s crash by Bernd Christoph Ströhm North Macedonia Government fails to support the economy, yet again by Branimir Jovanović Poland Recovery under way by Leon Podkaminer Romania Rapid post-COVID recovery amid large imbalances by Gábor Hunya Russia Delta variant looming over economic recovery by Vasily Astrov Serbia Continuing to impress by Branimir Jovanović Slovakia Shortage of computer chips could dampen prospects by Doris Hanzl-Weiss Slovenia The upcoming presidency of the EU Council places internal politics in the spotlight by Niko Korpar Turkey Performing well again in 2021 by Richard Grieveson Ukraine Recovery driven by a spending spree by Olga Pindyuk