20220119-牛津经济研究院-Europe_Key_Themes_2022_CEE_is_in_for_an_eventful_year_5页_344kb

Summary: CEE Region Outlook for 2022

Introduction

The Central and Eastern European (CEE) region is expected to have an eventful year in 2022, marked by uneven economic recovery from the pandemic, high inflation risks, and growing political uncertainty. Despite challenges such as supply shortages and easing supply constraints, the region's growth is projected to rebound, with Poland likely outperforming other countries.

Key Themes

• Inflation Risks: Inflation is higher than in the broader EU and is expected to peak in Q1 2022 before gradually declining. Structural factors may sustain elevated inflation levels. Poland is most exposed, while Slovakia's risks are contained. Central banks are likely to maintain hawkish monetary policies, potentially leading to currency appreciation.

• Industrial Recovery: Industry is expected to grow strongly in 2022 due to easing supply shortages, high demand (particularly in automotive), and supportive external factors like EU recovery funds. However, the recovery is gradual, and weak consumption in early 2022 may limit its impact.

• Public Investment: The EU's NGEU plan aims to boost public investment in CEE, but political and fiscal consolidation issues in countries like Poland could hinder implementation, potentially reducing public investment by up to 25%. High investment concentration in countries like Poland and Slovakia could amplify risks.

• Political Tensions: Hungary's elections in April pose significant risks, with potential changes impacting foreign policy. In Poland, political instability, rising social tensions, and conflicts with the EU may lead to snap elections, even as initial polls suggest the ruling coalition remains strong.

• Uneven Economic Growth: Growth disparities are anticipated, with Hungary and Poland slowing from 2021 peaks, while Slovakia lags due to late Covid waves. Poland is projected as the sole outperformer, supported by loose policy stance, but risks include loss of EU funding and synchronized weakening in investment.

Conclusion

The CEE region's 2022 recovery and growth outlook are favorable but uneven, facing challenges from high inflation, supply constraints, and political instability. Countries must navigate these risks to capitalize on industrial and investment opportunities.