Current account positions improve, but risks remain

There has been further evidence over the past month that resilient export growth, weak domestic demand and lower energy prices have helped to improve current account positions across Central and Eastern Europe this year. This has been particularly notable in Hungary – which in March recorded its first monthly current account surplus since early 2021 – and current account positions have improved in Czechia and Poland too. In contrast, deficits remain very wide in Romania and Turkey. Turkey’s central bank has burned through large amounts of FX reserves in an attempt to support the lira ahead of elections this month. And the re-election of Recep Tayyip Erdogan as president is likely to mean that attracting capital inflows will remain difficult. We think that a sharp economic adjustment, including large currency falls, lie in store.