Growth outlook brightens, but tough times still ahead

The growth outlook for 2023 across Central and Eastern Europe has brightened a bit over the past month. Wholesale European natural gas prices have continued to fall sharply and survey measures of activity have generally improved. The outlook for external demand looks a bit better too as the downturn in the eurozone is likely to be shallower than we had thought. That said, headwinds to activity remain strong, not least from continued high inflation and the lagged impact of aggressive monetary tightening last year. We think that some economies, like Czechia and Hungary, were already in recession over the second half of 2022 and that GDP growth in most of the region will still disappoint the current consensus expectations this year.