Central Europe poised to dodge recession as regional economies show resilience
The economies of Central and Eastern Europe have proven more resilient to shocks from the Russia-Ukraine conflict than initially expected, according to the Vienna Institute for International Economic Studies’ Winter Forecast. While growth will be significantly lower than in 2022 in almost all countries, only Russia, where GDP is expected to shrink by 3%, and Hungary with a decline of 1%, will experience full-year contractions.
The institute’s deputy director Richard Grieveson says most countries of the region have probably already processed most of the economic shock caused by Russia’s war on Ukraine. If the conflict doesn’t escalate further, growth in Eastern Europe should pick up again from the second half of the year as inflation begins to fall from 15-year highs.
The relative resilience sets the stage for a recovery in CEE assets later in the year, with bright spots such as Romania’s success in attracting companies’ reshoring operations, Croatia’s euro adoption and Turkish pre-election spending offering opportunities for outperformance.