Economic forecast: Eastern Europe’s resilience likely to fade as war and inflation pressures mount
Russia’s war in Ukraine is causing high inflation and adding to supply-chain bottlenecks
Economic growth in the region will slow drastically in the second half of the year
Risks that energy crisis could push region into recession are increasing
Ukraine’s economy will contract sharply
Russia: Economic shock in stages (GDP -7% in 2022; -3% in 2023)
The war in Ukraine is clearly having negative effects on the economies of the 23 countries of Central, Eastern and Southeastern Europe (CESEE), but so far the scale of the impact varies widely across the region. This is demonstrated by the new summer forecast of the Vienna Institute for International Economic Studies (wiiw).
Although growth will be considerably lower on aggregate than expected pre-invasion, most of the region will avoid an economic recession this year. The 11 EU members of the region continue to be among the most resilient. Despite high inflation, the energy crisis, supply-chain problems and slowing dynamics in industry they should be able to grow on average by 3.3% this year. The main pillar of the economy is private consumption, while exports are weakening. The six Western Balkan states and Turkey will grow at a similar pace in 2022 – by 2.9% and 2.7% year on year, respectively – which is a weak performance for both compared with the previous year.