The economies of Central and Eastern Europe (CEE) are expected to post GDP growth between 3.7% and 6.9% in 2021, according to the Austrian financial services provider Erste Group.
The Vienna-based banking group noted the CEE region proved its resilience during 2020 and also during the first quarter of 2021. Although Covid-related restrictions weighed on the services and retail sectors, the manufacturing sector – which traditionally plays a key role in the region – was much less affected overall.
The confidence placed in the region is also reflected in performance of its stock markets: during the first half of the year, the market capitalization of the major CEE indices increased by 17.6% on a weighted average basis.
During the second quarter of this year, Erste raised its forecasts for full-year GDP growth for all the CEE countries where it operates. The group's macro research specialists now expect most of the economies in the CEE region to post growth above the eurozone average (+4.4%) this year.
“The economies in Central and Eastern Europe have done well during the crisis. The indicators are now clearly pointing to an economic recovery that is even more dynamic in the eastern part of the EU than in Western Europe. I’m convinced that the EU Recovery Fund will provide an additional impulse for growth in the coming years,” Bernd Spalt, CEO of Erste Group said.
The economic stimulus packages of the EU Recovery Fund involve payments to the CEE countries amounting to between 3.3% (Czech Republic) and 13.4% (Romania) of the countries’ GDP levels in 2020.
Clear growth expectations are attached to the application of these funds: current estimates suggest that the grants that the EU Recovery Fund will provide CEE economies can provide an additional boost to their GDP levels in 2026 of between 1.2% (Czech Republic) and 2.9% (Romania).
Because the EU member states are implementing their EU Recovery Fund plans at the same time, the cross-border “spillover effects” provide an additional contribution to the funds’ overall positive effect on GDP levels or may actually even account for a significant part of that effect, Erste said.
These forecasts do not yet take into account the additional positive contributions to long-term economic performance that potential structural reforms, especially in the areas of sustainability and digitalization, can provide, Erste pointed out. Parts of the EU Recovery Fund resources are explicitly linked to conditions and milestones in these areas.
The positive outlook for the region’s macroeconomic environment gives Erste Group grounds for optimism. The banking group expects its operating income to continue rising.
Founded in 1819 as the first Austrian savings bank, Erste Group went public in 1997 with a strategy to expand its retail business into Central and Eastern Europe (CEE). Since then its customer base has grown through numerous acquisitions and organic growth from 600,000 to more than 17 million.