Household consumption has emerged as a key driver of economic growth in Central and Eastern Europe (CEE) in 2024, with Romania, Croatia, and Hungary leading the charge. Romania reported a substantial growth rate of 5.9%, followed closely by Croatia at 5.6% and Hungary at 5%. These figures underscore the region's reliance on consumer spending to fuel economic progress. The outlook for the coming year remains relatively positive, with expectations of continued growth across the CEE.
Despite a robust focus on private consumption, other CEE countries experienced varying levels of growth. Slovenia reported the smallest increase, with consumption rising by only 1.6%. However, projections suggest that private consumption in Poland, Czechia, and Slovenia will grow at a slightly faster rate than witnessed in 2024. The anticipated moderation in expenditure growth in Romania is largely attributed to factors such as the base effect, frozen pensions and wages in the public sector, and fiscal consolidation measures.
Currency and Economic Trends
The CEE currencies started the week on a weaker note against the euro, with the EURHUF touching 400 and the EURPLN moving up to 4.19. This development reflects broader economic uncertainties influenced by global events. Long-term yields declined on Monday, indicating a cautious market sentiment amid concerns over potential economic impacts stemming from geopolitical risks and trade tariffs initiated by former U.S. President Donald Trump.
Persistent worries regarding the economic fallout from these tariffs and associated geopolitical risks have driven investors towards safe-haven assets such as bullion. Despite these concerns, a recovery in risk sentiment is evident, bolstered by a broadly weaker U.S. Dollar and optimistic fiscal developments in Germany. The pair continues to advance as uncertainty surrounding Trump's tariffs and fears of a U.S. recession keep the dollar on a downward trajectory.
GDP Growth Outlook
While household consumption has been strong, overall GDP growth in Hungary and Romania did not meet expectations due to other GDP components offsetting consumer gains. A decline in growth rates is anticipated in Croatia, Hungary, and Slovakia, influenced by various factors that will be elaborated on in forthcoming Macro Outlooks. These trends highlight the complex interplay of domestic consumption with external economic pressures.
Despite robust household spending, these economies face challenges that may temper growth prospects. Erste Bank Sparkassen (CR) and its affiliates emphasize that while the information provided is deemed reliable, they do not assume responsibility for its accuracy or completeness. As such, stakeholders are encouraged to consider these insights as part of a broader economic analysis.