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Monthly Report No. 1/2022

Author

Listed:
  • Vasily Astrov

    (The Vienna Institute for International Economic Studies, wiiw)

  • Alexandra Bykova

    (The Vienna Institute for International Economic Studies, wiiw)

  • Rumen Dobrinsky

    (The Vienna Institute for International Economic Studies, wiiw)

  • Selena Duraković

    (The Vienna Institute for International Economic Studies, wiiw)

  • Richard Grieveson

    (The Vienna Institute for International Economic Studies, wiiw)

  • Doris Hanzl-Weiss

    (The Vienna Institute for International Economic Studies, wiiw)

  • Marcus How
  • Gabor Hunya

    (The Vienna Institute for International Economic Studies, wiiw)

  • Branimir Jovanović

    (The Vienna Institute for International Economic Studies, wiiw)

  • Niko Korpar

    (The Vienna Institute for International Economic Studies, wiiw)

  • Sebastian Leitner

    (The Vienna Institute for International Economic Studies, wiiw)

  • Isilda Mara

    (The Vienna Institute for International Economic Studies, wiiw)

  • Olga Pindyuk

    (The Vienna Institute for International Economic Studies, wiiw)

  • Sandor Richter

    (The Vienna Institute for International Economic Studies, wiiw)

  • Bernd Christoph Ströhm

    (The Vienna Institute for International Economic Studies, wiiw)

  • Maryna Tverdostup

    (The Vienna Institute for International Economic Studies, wiiw)

  • Nina Vujanović
  • Zuzana Zavarská

    (The Vienna Institute for International Economic Studies, wiiw)

  • Adam Żurawski
Abstract
Winter Forecast Update Strong Growth but Big Downside Risks in 2022 Economic Forecasts for Eastern Europe for 2022-24 In CESEE, both inflation and COVID-19 cases are rising rapidly. Plan A in the region seems to be to hope that both problems largely resolve themselves, with real interest rates set to remain mostly negative and COVID-19 restrictions limited. Our baseline macroeconomic outlook for the region is relatively upbeat, reflecting adaptability, resilience, and the assumption that the vast majority of COVID-19 cases in the current and any further waves of the pandemic will be very mild. Although CESEE growth will slow from 5.7% last year to 3.2% in 2022, this reflects the phasing-out of favourable base effects from 2020 and the weak performance of the region’s two biggest economies, Russia and Turkey. In both EU-CEE and the Western Balkans, real growth will top 4% this year – a slowdown from 2021, but still a healthy rate of expansion. However, there are material downside risks to these forecasts, especially owing to the possibility that high inflation will dampen economic growth momentum. Meanwhile, political risks are at their highest since 2014 in the former Soviet Union, and highest since the 1990s in the Western Balkans. A Russian invasion of Ukraine would lead to a renewed exchange of sanctions with the West and an even sharper spike in energy prices, damaging the economies of both sides. Overview by Richard Grieveson Most economies in CESEE will post robust growth again this year, but both Russia and Turkey are set for a slowdown, and downside risks have risen across the region. Political risks in CESEE in 2022 by Marcus How Political risks in CESEE are at their highest level since the 1990s, due to a combination of the threats of war in Ukraine and secession in Bosnia and Herzegovina, and some key elections in EU-CEE. Country updates Albania Strong rebound in investment and consumption boosts growth by Isilda Mara Belarus Economic prospects remain gloomy by Rumen Dobrinsky Bosnia and Herzegovina Political tensions reach the highest level since the 1990s by Selena Duraković Bulgaria New government, but major economic policy changes unlikely by Rumen Dobrinsky Croatia Solid growth following stellar recovery by Bernd Christoph Ströhm Czechia Resilient growth despite bumps in the road by Zuzana Zavarská Estonia Growth approaching the limits by Maryna Tverdostup Hungary Time to step on the brakes by Sándor Richter Kazakhstan Stable outlook despite recent turmoil by Alexandra Bykova Kosovo Growth momentum hampered by energy crisis by Isilda Mara Latvia Further restrictions slow down recovery by Sebastian Leitner Lithuania Economic catch-up continues amidst the pandemic by Sebastian Leitner Moldova Hit by Russian gas price hikes by Gábor Hunya Montenegro Ambitious economic reform increases both optimism and the fiscal risks by Nina Vujanović North Macedonia Can the new government stimulate the economy? by Branimir Jovanović Poland Personal income tax reform off to a bad start by Adam Żurawski Romania Stable government helps meet conditions for EU assistance by Gábor Hunya Russia Geopolitical escalation on the cards by Vasily Astrov Serbia Public spending lifts the economy by Branimir Jovanović Slovakia Semiconductor shortage still constrains future growth by Doris Hanzl-Weiss Slovenia Stable economic outlook to shape key election year by Niko Korpar Turkey Weaker growth after currency collapse by Richard Grieveson Ukraine Threat of military invasion by Russia by Olga Pindyuk

Suggested Citation

  • Vasily Astrov & Alexandra Bykova & Rumen Dobrinsky & Selena Duraković & Richard Grieveson & Doris Hanzl-Weiss & Marcus How & Gabor Hunya & Branimir Jovanović & Niko Korpar & Sebastian Leitner & Isilda, 2022. "Monthly Report No. 1/2022," wiiw Monthly Reports 2022-01, The Vienna Institute for International Economic Studies, wiiw.
    • Handle: RePEc:wii:mpaper:mr:2022-01
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    File URL: https://wiiw.ac.at/monthly-report-no-1-2022-dlp-6010.pdf
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    More about this item

    Keywords

    CESEE; economic forecast; Central and Eastern Europe; Southeast Europe; Western Balkans; EU; euro area; CIS; coronavirus; COVID-19; Omicron; China; zero-COVID; pandemic; restrictions; lockdowns; EU Recovery and Resilience Facility; NextGenerationEU; semiconductors; credit; investment; exports; FDI; labour markets; unemployment; inflation; exchange rates; monetary policy; fiscal policy; near-shoring; political risks;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • P24 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation
    • P27 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Performance and Prospects
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid
    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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