Eastern economies will outpace average EU growth

Subject

Central-East European economies’ resilience in an adverse global climate.

Significance

The economies of the eleven newer EU member states (EU-11) from Central-Eastern Europe (CEE) are projected to maintain momentum despite modest average growth rates in the euro-area of 1.2% in 2019 and 1.4% in 2020, and in the EU-28 of 1.4% this year and 1.6% next, according to the European Commission’s mid-year economic forecast. Poland, Hungary and Romania in particular are expected to grow by 4% or more this year, while projections for all the other CEE economies are over 2-3%. Although most of this growth is due to domestic demand, positive net exports remain important for some countries.

Impacts

• Monetary policy across the EU is expected to be accommodative.
• Low interest rates and readiness to deploy such policy instruments as quantitative easing should support confidence.
• The example of inflation-tolerant growth in CEE could suggest a revaluation of inflation targets across the EU.