Monthly Report No. 7-8/2023


Vasily Astrov, Alexandra Bykova, Rumen Dobrinsky, Selena Duraković, Meryem Gökten, Richard Grieveson, Doris Hanzl-Weiss, Gabor Hunya, Branimir Jovanović, Niko Korpar, Sebastian Leitner, Isilda Mara, Olga Pindyuk, Sandor Richter, Bernd Christoph Ströhm, Maryna Tverdostup, Nina Vujanović, Zuzana Zavarská and Adam Żurawski

wiiw Monthly Report No. 7-8, July-August 2023
51 pages including 3 Tables, 24 Figures and 1 Box

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OVERVIEW 2021-2022 AND OUTLOOK 2023-2025
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Summary of key recent macroeconomic data for CESEE, and overview of new wiiw forecasts for 2023-2025 (Excel file)

Summer Forecast Update

Southeast Europe Motors on while Rest of Region Struggles

Economic Forecasts for Eastern Europe for 2023-25

The expected acceleration of growth in 23 countries of Central, East and Southeast Europe (CESEE) covered by wiiw to 1.6% in 2023 is almost entirely due to the turnaround in the CIS and Ukraine. In Russia, whose economy has succeeded in digesting the short-term shock of sanctions, increased military production and robust real wage growth should enable GDP recovery of 1% this year. However, elsewhere in the region growth is projected to decelerate sharply due to the expected near stagnation in the euro area and the still high inflation, which is eating into the real purchasing power of households. The Western Balkan countries, as well as Southeast European EU member states Romania and Croatia will show above-average growth performance thanks to major inflows of Recovery and Resilience Facility (RRF) EU funds, FDI, remittances and tourism revenue. However, the recent tensions in Northern Kosovo do not bode well for the prospects of Kosovo and Serbia and may affect their attractiveness for future investments. In 2024 and 2025, growth in the CESEE region is projected to pick up to 2.5% and 2.8%, respectively.

Global assumptions: Mood darkening as summer arrives by Richard Grieveson
The euro area economy last year showed impressive resilience to the energy price shock, but it has now slipped into technical recession and we continue to expect only a moderate positive outturn for the economy in 2023 as a whole. High frequency and sentiment data suggest particular weakness in the manufacturing sector, which now has to contend with substantially higher energy prices and a broader weakness in demand from many key markets. For CESEE, the implications of all this are similar to the situation in spring, with external demand from the euro area and other key markets like China unlikely to be a major growth driver for the region this year. 

Southeast Europe motors on while rest of region struggles by Vasily Astrov
Southeast Europe will be the bright spot in CESEE this year, due to a combination of inflows of Recovery and Resilience Facility (RRF) EU funds, FDI, remittances and tourism revenue, as well as generally lower rates of inflation than the rest of CESEE. Nevertheless, most economies in this region, and in CESEE as a whole, will post slower growth this year than last, on account of high inflation and the near stagnation in the euro area. The expected acceleration of aggregate growth in CESEE this year is almost entirely due to the turnaround in the CIS and Ukraine, where economies are gradually adjusting to the war-induced shock of 2022. In 2024 and 2025, growth in the CESEE region is projected to pick up to 2.5% and 2.8%, respectively.

Two-speed CEE region can support Austrian growth by Doris Hanzl-Weiss
Despite the overall gloomy environment, the relatively good performance of key markets in Southeast Europe such as Slovenia, Croatia and Romania will support Austria’s economic growth this year. Austria’s ties with Russia are being unwound only slowly: its gas dependence is still high, and its banking sector is at risk.

Country updates:

  • Albania: Economy to benefit from growing tourism by Isilda Mara
  • Belarus: Adjusting to the economic blockade by Rumen Dobrinsky
  • Bosnia and Herzegovina: Inflation is cooling, but so is the economy by Selena Duraković
  • Bulgaria: Will a new government manage to address the mounting fiscal problems? by Rumen Dobrinsky
  • Croatia: Bumper tourist season in prospect by Bernd Christoph Ströhm
  • Czechia: Signs of inflation moderating, but still painfully high by Zuzana Zavarská
  • Estonia: Pressures on competitiveness mount by Maryna Tverdostup
  • Hungary: Net exports will fail to compensate for the drop in consumption and investment by Sándor Richter
  • Kazakhstan: Positive outlook despite external headwinds by Alexandra Bykova
  • Kosovo: Trouble brewing, but who gains from another crisis in Northern Kosovo? by Isilda Mara
  • Latvia: From stagnation to moderate growth by Sebastian Leitner
  • Lithuania: Resisting a war-induced recession by Sebastian Leitner
  • Moldova: Increased international assistance and better harvest improve growth prospects by Gábor Hunya
  • Montenegro: Tourism and the energy sector support growth by Nina Vujanović
  • North Macedonia: A promising start to the year, but an uncertain outlook by Branimir Jovanović
  • Poland: A recession in the making by Adam Żurawski
  • Romania: Both growth and inflation slowing by Gábor Hunya
  • Russia: Recession has been left behind by Vasily Astrov
  • Serbia: Outlook still cloudy by Branimir Jovanović
  • Slovakia: Future outlook jeopardised by political uncertainty by Doris Hanzl-Weiss
  • Slovenia: Cautious optimism, but unease over performance of key trading partners by Niko Korpar
  • Turkey: Signalling a shift to orthodox monetary policies by Meryem Gökten
  • Ukraine: Fragile recovery amid the war by Olga Pindyuk


Reference to wiiw databases: wiiw Annual Database, wiiw Monthly Database, wiiw FDI Database

Keywords: CESEE, economic forecast, Central and Eastern Europe, Western Balkans, EU, euro area, CIS, Austria, war in Ukraine, Ukrainian refugees, energy dependence, EU accession, COVID-19, EU Recovery and Resilience Facility, economic growth, labour markets, inflation, stagflation, monetary policy, fiscal policy

JEL classification: E20, E21, E22, E23, E24, E31, E32, E5, E62, F21, F31, H60, I18, J20, J30, O47, O52, O57, P24, P27, P33, P52

Countries covered: Albania, Belarus, Bosnia and Herzegovina, Bulgaria, CESEE, CIS, Croatia, Czechia, Estonia, EU-CEE, European Union, Hungary, Kazakhstan, Kosovo, Latvia, Lithuania, Moldova, Montenegro, New EU Member States, North Macedonia, Poland, Romania, Russia, SEE, Serbia, Slovakia, Slovenia, Turkey, Ukraine

Research Areas: Macroeconomic Analysis and Policy