2024-01-30 07:30:00
Austria is likely to benefit from 2.5 percent growth in the Visegrád countries this year. Ukraine’s economic recovery is at risk due to uncertainty regarding future Western support. Significant downside risks range from a German recession to a re-elected US President Donald Trump. “Russian military spending acts like a drug.”
Even if the external conditions remain difficult and major risks remain, economic development in the countries of Central, Eastern and Southern Europe is clearly pointing upwards. The eleven EU member states from the region in particular started the year 2024 with clearly improved prospects. The gross domestic product (GDP) of these countries is expected to increase by an average of 2.5 percent this year following 0.6 percent last year, according to the current winter forecast from the WIIW, the Vienna Institute for International Economic Studies. A further increase in economic output of 3.1 percent is forecast for the following two years. This means that growth in this region will be significantly stronger than in the Eurozone, for which a GDP increase of 0.8 percent is expected this year.
Richard Grieveson, study author and WIIW deputy director, cites “drastically falling inflation, sharply rising real wages and further increases in private consumption in combination with impending key interest rate cuts” as the most important factors for this improvement. These elements should get growth in this region back on track. An additional “key factor” is the recovery of the ailing and important German economy, which is expected from the middle of the year. At the same time, Grieveson points to significant downside risks. “A continuation of the recession in Germany, an escalation of the wars in Ukraine and Gaza, disruptions to supply chains such as those currently occurring in the Red Sea and, above all, the election of Donald Trump as the next US President might seriously endanger the recovery.”
Poland and Romania (3.0 percent GDP increase each) should show the strongest growth among the eleven Central European EU countries this year, ahead of Slovenia (2.7) and Croatia (2.6). Low growth is expected for Bulgaria, Lithuania (1.5 each), Latvia, Slovakia (1.6 each) and the Czech Republic (1.7). A declining economy is only expected for Estonia (-0.2 percent). In the previous year, economic output fell in all three Baltic republics, most sharply in Estonia (-2.8 percent). Three years of growth are ahead in almost all of the group’s eleven countries, with the exception of Poland, where a forecast increase of 3.5 percent in 2025 – together with Romania the group’s strongest growth – is expected to be followed by a decline to 3.0 percent .
The six countries in the Western Balkans that have submitted EU membership applications or where accession negotiations are already underway are experiencing a similar dynamic to the Eastern European EU members. The WIIW predicts a slight increase in economic output from 2.4 (2023) to 2.6 percent this year. Growth is expected to continue in the next few years, to 2.9 (2025) and 3.1 (2026) percent. The growth drivers in the Western Balkans are Albania, Montenegro and Kosovo, with growth rates of over 3 percent.
The WIIW expects a sometimes very different and volatile development for the group of former republics of the Soviet Union. The fastest-growing country in the entire forecast is Kazakhstan, with GDP growth consistently above 4 percent for the years up to 2026.
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