CEE Outlook | CEE Growth Navigator
CEE Macro Outlook , 19. Nov.
We would like to introduce a new report, the CEE Growth Navigator. This report will be released regularly, every quarter, shortly after the flash estimates of GDP data are published for all CEE countries. Our aim with this report is to summarize expected changes and trends in relation to the latest GDP data. The more detailed economic outlook, including growth drivers and market impact, will remain a part of What's Up CEE, our key CEE Macro Outlook. This report will be issued once the GDP structure is known for all countries.
The economic growth in Hungary and Romania was the most surprising in Q3, with the former contracting and the latter expanding by 1.1% YoY, well below expectations. As a result, we have already revised our 2024 growth forecast downwards to 0.5% and 0.8%, respectively. Similarly, flash GDP in Slovakia was also disappointing at 1.2% YoY, below expectations of expansion close to 2%. Economic growth in Serbia was solid at 3.1% YoY in Q3 2024, although below our expectations. We still expect Serbia to expand by 4% in 2024, the most within the CEE region. In other countries (Czechia, Poland, and Slovenia), flash estimates were mostly in line with market consensus regarding year-on-year growth dynamics. Nevertheless, the Polish economy unexpectedly contracted quarter-on-quarter, as flash 3Q24 landed at -0.2% QoQ. Overall, the economic recovery has been weaker than initially anticipated.
Regarding the outlook for 2025, we continue to see risks to the downside concerning our current forecasts due to the relatively sluggish recovery of the German economy. In Czechia, we already revised the 2025 growth forecast down to 2.3%. While the Eurozone as a whole seems to be doing slightly better than expected, the weakness of the German industry is weighing on the economic development of the main trading partner of CEE countries. Moreover, the increased uncertainty in the aftermath of the US election and the impending presidency of Donald Trump will affect market sentiment and the appetite to undertake new investment projects. The scale of protectionism will determine to what extent the economies in the region will be held back in 2025 and beyond.
While external factors may add to inflation figures, we expect disinflation to continue in 2025 in most of the CEE countries. The weak economic recovery and high uncertainty ahead regarding growth prospects are disinflationary in nature. The most outstanding exception is Slovakia, where changes in indirect taxes and delayed adjustment of energy prices will increase inflation in 2025. While the CEE central banks may be done with monetary easing in 2024, we expect more interest rate cuts in 2025 and 2026.
The economic growth in Hungary and Romania was the most surprising in Q3, with the former contracting and the latter expanding by 1.1% YoY, well below expectations. As a result, we have already revised our 2024 growth forecast downwards to 0.5% and 0.8%, respectively. Similarly, flash GDP in Slovakia was also disappointing at 1.2% YoY, below expectations of expansion close to 2%. Economic growth in Serbia was solid at 3.1% YoY in Q3 2024, although below our expectations. We still expect Serbia to expand by 4% in 2024, the most within the CEE region. In other countries (Czechia, Poland, and Slovenia), flash estimates were mostly in line with market consensus regarding year-on-year growth dynamics. Nevertheless, the Polish economy unexpectedly contracted quarter-on-quarter, as flash 3Q24 landed at -0.2% QoQ. Overall, the economic recovery has been weaker than initially anticipated.
Regarding the outlook for 2025, we continue to see risks to the downside concerning our current forecasts due to the relatively sluggish recovery of the German economy. In Czechia, we already revised the 2025 growth forecast down to 2.3%. While the Eurozone as a whole seems to be doing slightly better than expected, the weakness of the German industry is weighing on the economic development of the main trading partner of CEE countries. Moreover, the increased uncertainty in the aftermath of the US election and the impending presidency of Donald Trump will affect market sentiment and the appetite to undertake new investment projects. The scale of protectionism will determine to what extent the economies in the region will be held back in 2025 and beyond.
While external factors may add to inflation figures, we expect disinflation to continue in 2025 in most of the CEE countries. The weak economic recovery and high uncertainty ahead regarding growth prospects are disinflationary in nature. The most outstanding exception is Slovakia, where changes in indirect taxes and delayed adjustment of energy prices will increase inflation in 2025. While the CEE central banks may be done with monetary easing in 2024, we expect more interest rate cuts in 2025 and 2026.