Economic data from across Central and Eastern Europe (CEE) tells a hopeful story of countries adapting to new realities and overcoming their greatest challenges while seizing exciting new opportunities. Slovenia recorded an increase of 1.1% yoy in producer prices. At the same time, Germany’s flash Composite PMI indicates a quite strong momentum with the indicator reading well above the neutral level of 50. Poland is overcome with ever-more-negative producer prices and the worst in wage growth as well. The debate over corporate tax reform rages on.
As Slovenia prepares to release its real wage growth figures for June at 10:30 AM CET, attention remains focused on how these changes will affect consumer spending and overall economic health. The release is anticipated to shed light on the purchasing power of Slovenians amidst varying inflation rates and economic conditions.
Divergent Trends in Poland’s Economy
Poland’s economic landscape paints a picture of both opportunity and desolation. The Ministry of Finance is currently considering some changes to corporate income tax. They are even floating an increase in the corporate income tax rate on banks. This decision comes on the back of the country’s 2.9% year-over-year industrial output growth in July, indicating continued resilience in some sectors. This positive trend is in stark contrast to a 1.2% year-over-year decline in producer prices over the same time period.
Poland’s employment numbers point to a deepening of a 0.9% year-over-year contraction in July that calls into question the health of the labor market. The effect on consumer confidence and spending power would still be considerable, especially with wage growth slowing to 7.6% year-over-year. As the federal government considers changes to fiscal policy, these metrics will be key for lawmakers who want to prioritize economic activity in their stimulus efforts.
Poland’s President took an audacious political step by vetoing a key energy bill. This bill was a great step towards removing barriers for investment in renewable energy. Reversing this decision puts our nation’s commitment to sustainable energy solutions into serious doubt. It might even discourage long-term investments in green technology.
Germany’s Positive Indicators Amidst Caution
Today, Germany’s economic indicators have rebounded as strongly as any flashpoint. The Composite PMI has now jumped above that all important 50 level, indicating expansion in the economy. A flash Manufacturing PMI reading of 49.9 is critical context. This figure indicates that manufacturing activity is slightly below the expansion cut off point, but it projects that a slow, yet steady, recovery is forthcoming.
Germany’s hopeful trends are a welcome sign, as France has seen largely the same positive developments lately. The impact on industry performance there has been impressive. These advances are a sign that both countries are recovering from recent economic recessions. From builders to shippers, that recovery provides a hopeful forecast for their respective trades.
Yet, as desirable to have as these new indicators may be, it is still important to approach them in a wider context. The backdrop of Russia’s war in Ukraine remains a factor, with continued geopolitical tensions and supply chain disruptions creating a risk to sustained growth across the region. Analysts and economists will be watching future data closely to see if these positive signs turn into a strong economic recovery from the pandemic.
Developments in Romania and Czechia
Romania has taken admirable steps in recent years to improve its fiscal position. It positively succeeded to sell RON 500 million in government notes with due date in 2028 and still other RON 500 million in bonds maturing in 2033. The bid-to-cover ratio for these auctions was above 2, a sign of high demand from investors and confidence in Romania’s fiscal management.
Czechia has reduced its projection for the fiscal deficit for this year. It’s a major reversal after corporate tax revenue came in almost $1 billion over forecast. Such a revision would acknowledge and reward the country’s most efficient tax collectors while freeing up new revenue for public investment.
As CEE economies continue to evolve, each country’s unique circumstances will shape its path forward. Policymakers must remain vigilant and responsive to both domestic and external challenges while leveraging opportunities for growth.