Poland, Eastern Europe’s largest economy, has flashed a warning to investors after GDP fell 2.3% in the third quarter. The surprise contraction highlights how Eastern European economies are rapidly losing momentum in the face of a likely German recession and Russian aggression, the FT’s Raphael Minder and Marton Dunai report.
The severity of the Polish contraction surprised analysts, wiping out all of 2022’s growth so far. Consumer confidence has also fallen to its lowest level since March 2022 as inflation over 15% hits household finances just as state support is removed. In response, the central bank has continued to tighten lending conditions despite its further contribution to falling confidence.
The situation in Poland is reflected across the region, as post-Covid momentum fades amid higher import costs, low consumer confidence and contracting public spending that make a regional recession likely. While countries such as the Czech Republic, Hungary, and Romania haven’t experienced contractions yet, growth has continued to fall from high single digitals. The worst is likely ahead as winter energy availability remains uncertain and early indicators like manufacturing and consumer spending begin to flash red across the region.