Encouraging forecast figures for Central Eastern Europe and the Balkans

Rosy Prospects

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Mag. Linda Michalech
Corporate Communications Manager

Sberbank Europe AG
Tel.: +43 1 22732 1300
Mobile: +43 664 8891 3662
linda.michalech@sberbank.at

Rosy Prospects

Encouraging forecast figures for Central Eastern Europe and the BalkansGenerally speaking, the forecasters surprised their readers with positive news in fall 2017, with all the major institutions upgrading their growth forecasts for Europe, the USA and the global economy alike. The IMF's latest forecast predicts 3.6% global growth for 2017, and Europe has also seen growth gathering momentum in the past few months. Even the previously sluggish eurozone can expect growth of around 2,25% in 2017. Austria is no exception, and here too the recovery can be said to have arrived at last. The final balance for 2017 is expected to show real growth of 2,75-3% in Austria, which is significantly above the eurozone figure.  

The outlook for the CEE–SEE region is no less rosy. The EU member states in CEE, in particular, have not only achieved substantial growth rates in the last few years, but have surprised observers with an even stronger upswing in 2017. Following the general upward revision of the autumn forecasts, the Eastern European EU member states are now reckoning with an average growth rate of just above 4% in 2017, with only a slight tail-off to follow in 2018 and 2019. These countries have benefited, among other things, from strengthening import demand from the "old" EU member states, as well as from the relatively stable commodity prices. The trend of the past few years, which has seen Eastern Europe growing about twice as strongly as the eurozone, has thus been reinforced – which, if anything, makes the gap between the EU member states in CEE and the countries of the Western Balkans even more pronounced. The latter are growing less strongly, at 2.5% in 2017 as against 4.1% in the CEEEU, and their standard of living, most notably, is far below that of the EU member states in CEE. Average gross monthly wages in Serbia, for example, are no more than €524, while in Slovenia they are €1,600, in Croatia €1,075, and in the Czech Republic €1,058.  

The most striking trend in the region over the past few years – and to a limited extent this also applies to the Western Balkans – is the development on the labor market. Not only do all of the CEE-EU states, with the single exception of Croatia, now have single-digit unemployment rates, but unemployment in those countries, at an average 5.7% in 2017, is well below that in the eurozone (9.1% on average). At least equally important is the fact that the number of people in employment is generally higher than before the financial crisis. Individual countries – the Czech Republic, for instance, but also Hungary – now have a labor market situation that is very close to full employment. Real wages have seen a commensurately sharp increase in the past few years, which is one of major reasons why economic growth in the same period has chiefly been driven by consumer spending. In the Western Balkan states, the number of people in employment has likewise gone up and unemployment down. In these countries, however, unemployment rates are still at double-digit levels (average for 2017: 17.6%). Furthermore, the investment ratio in the Western Balkan states is still relatively low, which has a negative effect on their growth potential.

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