Europe: Key Themes 2023 – A tough start for CEE, uncertain finish

We expect Central and Eastern Europe will start 2023 in a synchronized economic downturn, like the rest of the EU. The region should emerge from recession in Q2 but the recovery will be uneven across the four economies, and we think risks to our growth forecasts are to the downside.

What you will learn:

• Poland and to a lesser extent Slovakia are likely to outperform the others. We expect the Czech Republic’s lacklustre performance will resume, while the risks of a much more severe downturn in Hungary are substantial.
• Inflation should finally start to ease early in 2023, primarily on the back of normalising commodity prices plus the increasing drag from the economic slowdown that will result in some softening of labour markets.
• Poland will remain in the political spotlight next year, with parliamentary elections in Q4. This will likely preclude substantial fiscal tightening. In Slovakia, the cost-of-living crisis might trigger snap elections, adding to policy uncertainty.
• As economic growth resumes in H2 2023, the focus will shift to long-term challenges. Addressing the region’s ageing population and meeting the EU’s Green Deal goals will need to begin in earnest.