Monthly Report No. 1/2024

Winter Forecast Update Recovering Amid Major Risks Economic Forecasts for Eastern Europe for 2024-26 As 2024 begins, the global economy is weak and regional and global risks abound, yet the outlook for most of CESEE is actually improving. The region has shown a high degree of resilience to fallout from Russia’s invasion of Ukraine and the highest inflation in decades. Across most of CESEE, inflation is falling, real wages are rising again and central banks have started to cut policy rates. On top of this, labour markets are strong, external balances are improving and tourism is robust. Growth in EU-CEE, the Western Balkans and Moldova will strengthen this year. However, Turkey, Ukraine, Russia and Belarus will post slower growth than in 2023, as they continue to struggle with one or more of still-high inflation, monetary tightening and the fallout from the invasion. From 2025, the recovery should strengthen further, with growth of around 3% or more in EU-CEE, the Western Balkans, Turkey and Moldova. Ukraine’s economy will also continue to grow, but a full recovery is contingent on an end to the war. Growth in Russia will remain below 2%, however, due to sanctions and supply-side constraints, including (most notably) acute labour shortages. External conditions for CESEE are challenging, to put it mildly. Yet growth in the euro area should strengthen this year, as inflation falls, real incomes recover and global trade gathers momentum. The risks to the outlook are large and on the downside. They include a delayed German recovery, the potential for tensions in the Middle East to lift oil prices and disrupt global trade, a Trump victory in the next US election, waning Western support for Ukraine, the stalling of the EU enlargement process, and a lack of reforms within CESEE. Winter 2024 interim forecast update by Statistics Department 1. Global assumptions Risks abound by Richard Grieveson 2. Regional overview Recovering amid major risks by Richard Grieveson 3. Austria and CESEE Recovering growth in the region will help Austria by Doris Hanzl-Weiss 4. Country updates Albania Riding on the crest of a tourism wave by Isilda Mara Belarus Economy recovers from the shocks, but lacks growth drivers by Rumen Dobrinsky Bosnia and Herzegovina Decent economic growth, increased political instability by Selena Duraković Bulgaria Sluggishness likely to prevail in 2024 by Rumen Dobrinsky Croatia Robust tourism sector and rising wages to underpin growth by Bernd Christoph Ströhm Czechia Waiting for Germany by Richard Grieveson Estonia Recession lingers on by Maryna Tverdostup Hungary Slow recovery after a hard landing by Sándor Richter Kazakhstan Economic growth slows but remains strong by Alexandra Bykova Kosovo Finally, visa-free travel to the Schengen area by Isilda Mara Latvia The upswing needs time by Sebastian Leitner Lithuania Households likely to end stagnation by Sebastian Leitner Moldova Economic recovery at high political risk by Gábor Hunya Montenegro Ambitious plans, cautious optimism by Marko Sošić North Macedonia Emerging from the dark? by Branimir Jovanović Poland Back on the growth track by Adam Żurawski Romania Modest recovery amid fiscal consolidation by Gábor Hunya Russia Military production boom drives economic recovery by Vasily Astrov Serbia Well-worn paths by Branimir Jovanović Slovakia Household spending to drive recovery by Doris Hanzl-Weiss Slovenia Getting back to normal after a year of extreme events by Niko Korpar Turkey Challenges persist despite tighter monetary policy by Meryem Gökten Ukraine Persevering amid dwindling Western support by Olga Pindyuk