Summer Forecasts for CESEE: Impressive resilience

Transcript:Summer Forecasts for CESEE: Impressive resilience:
Summer Forecasts for CESEE: Impressive resilience unlikely to last Olga Pindyuk, Economist July 6th 2022 Webinar A review of Q1’2022 Soaring inflation becomes the main challenge for economies Beyond supply-chain bottlenecks Household incomes strongly affected Policy response Outlook for 2022-2024: Negative risks are mounting First thoughts on the medium term Overview Note: CIS include Belarus, Moldova, and Kazakhstan Source: wiiw Monthly Database incorporating national and Eurostat statistics. Quarterly real GDP growth real change against preceding year in % EU-CEE and WB6 continue to show high degree of resilience, but likely temporary as headwinds are mounting Source: wiiw Monthly Database incorporating national and Eurostat statistics. . Consumer price inflation in February 2022 and May 2022, percentage change year on year Inflation has further accelerated during March-May 2022… Feb-22: 54.4 May-22: 73.5 Source: National sources, Eurostat, wiiw. CPI sub-components in May 2022, percentage change year on year … and is becoming increasingly broad-based, posing serious threat to growth momentum Note: Numbers above 100 suggest optimism about future business performance. Source: OECD. Business confidence index Business confidence started to dwindle as supply chain bottlenecks intensify and external demand weakens Note: Numbers above 100 suggest optimism about future economic performance. Source: OECD. Consumer confidence index Consumer confidence so far even more strongly affected as inflation starts to bite Source: wiiw Monthly Database incorporating national and Eurostat statistics. Average gross monthly wages, real growth in March 2022, % change year on year Inflation already eating into real household incomes, and this is likely to worsen in H2 Source: Eurostat, National sources. Share of food and non-alcoholic beverages in household expenditures in 2019, % …a slowdown in consumer spending is coming as households devote more of income to essentials Note: The at-risk-of-poverty rate is the percentage of persons living in households where the equivalised total disposable household income is below the at-risk-of-poverty threshold, defined as 60% of median equivalised disposable income of all households. Source: Eurostat. At-risk-of-poverty rate by poverty threshold in 2020, % Increasingly more households being pushed into poverty Note: June data as of 23.06.2022. Source: wiiw Monthly Database incorporating national statistics. Central bank nominal policy rate, end of month, % Most central banks continue to tighten sharply their monetary policy in response to soaring inflation… Note: Simple averages for country aggregates. CIS includes Belarus, Kazakhstan, and Moldova. Source: wiiw Monthly Database incorporating national statistics. Real policy rate, CPI deflated, % …but real interest