UniCredit Economists Forecast Stable Growth in Central and Eastern Europe

UniCredit economists expect economic growth in Central and Eastern European countries of around 2.6 percent in 2024 and 3 percent in 2025, with somewhat faster growth in the Western Balkans. These expectations refer to the EU member states in the CEE region – Croatia, Bulgaria, the Czech Republic, Hungary, Poland, Romania, Slovakia, and Slovenia.

Dan Bucsa, Chief Economist of the UniCredit Group for CEE, emphasizes that personal consumption will lead the growth, supported by faster growth in real wages, increasing borrowing, and government transfers.

– The Croatian economy is influenced by the same growth drivers that allow Croatian GDP to potentially grow more than the expected 2.5 percent in 2024, while an acceleration of growth to the projected 3.5 percent is expected in 2025, as all components of GDP should act in the same direction – adds Hrvoje Dolenec, Chief Economist of Zagrebačka Banka.

In the CEE Quarterly report for the second quarter of 2024, UniCredit economists also highlight that public investments will be the second most important growth driver, while net exports will slow down GDP dynamics this year. Economists expect budget deficits of less than 3 percent of GDP for 2024 and 2025 in Croatia, Bosnia and Herzegovina, Bulgaria, the Czech Republic, and Serbia, and deficits greater than 5 percent in Hungary, Slovakia, Poland, and Romania (countries at risk of excessive deficit), as well as in Turkey.

According to the report, pro-European parties are expected to win more than two-thirds of the seats from CEE countries in the European Parliament, after which they will seek more important positions in European institutions and NATO. The momentum for EU enlargement is accelerating, and the Western Balkan countries will benefit if reforms are implemented. The EU accession process could also serve as a hint for an increase in ratings for this group of countries.

Stable capital flows will cover current account deficits in all Central and Eastern European countries, except for Bosnia and Herzegovina, Romania, and Turkey, where additional funds will come from international financial institutions, external state borrowing, and private borrowing abroad.