Wiiw forecast for Eastern Europe: the worst is yet to come

Higher-than-expected growth in many countries of the region in the first half of the year, thanks to a post-pandemic recovery, has led to a significant upwards revision of the forecast for 2022, but the picture for the rest of 2022 and 2023, however, is quite different, according to the Autumn Forecast of Vienna-based think-tank wiiw.

"Runaway inflation is reducing real incomes and thus private consumption, which has been the most important pillar of growth up to now. Add to that the increasingly threatening energy crisis, a weakening German economy, big interest-rate hikes and too little fiscal support from governments. So the worst is yet to come for Eastern Europe," says Branimir Jovanović, an economist at wiiw and lead author of the autumn forecast.

For Romania, wiiw projects the GDP growth to halve at 2.2% in 2023 from an estimated 4.8% growth this year to recover at 3.5% in 2024.

The twin deficits are expected to narrow somewhat slightly: much slower compared to the S&P's forecast attached to the country update issued on October 14. Thus, wiiw sees Romania's CA deficit at 9.1% this year (a much more realistic estimate compared to S&P's 8.8% figure), and its forecast for 2024 is 7.7% of GDP (5.9% under the S&P scenario).

Wiiw expects Romania's fiscal deficit this year at 6.5% of GDP (S&P: 5.9%) to gradually narrow to 4.4% of GDP in 2024 (S&P: 3.5%).

(Photo source: Vinnstock/Dreamstime.com)