Erste sees moderate economic growth in CEE

Adoption of zero-emission vehicles gaining traction in Central and Eastern Europe (CEE), according to Erste Group’s macroeconomic report for August 2024.

The Austrian financial service provider’s analysis sees varied economic trajectories and fluctuating trade balances across CEE, as Slovenia reported a trade deficit of EUR 0.64bn in June 2024, contrasting with Hungary’s trade surplus of EUR 1.1bn. Meanwhile, Czechia saw a 4.4% year-on-year increase in retail sales excluding cars in the same month.

Romania leads for EV sales, Croatia, Slovakia laggards

The report also highlights a growing trend in the adoption of battery-only electric vehicles (EVs). In 2023, 1.5mn new battery-only electric passenger cars were registered in the EU, marking a 48.5% increase from the previous year. The total number of these vehicles now stands at 4.5mn, representing 14.6% of all new vehicle registrations in 2023. This growth reflects the region’s continued shift towards greener transport.

Romania leads CEE regarding share of new zero-emission vehicles, accounting for 10.6% of all new vehicles in 2023. In contrast, Croatia and Slovakia reported the lowest shares, each with less than 3%. On average, the CEE region saw 5.4% of new vehicles as zero-emission in 2023.

Despite these advancements, the overall stock of passenger cars that are battery-only electric in the EU remains low, accounting for just 1.7% of all cars at the end of 2023, indicating a gap between new registrations and the existing fleet.

Economic developments across CEE region

Erste also delves into other critical economic indicators in CEE. Retail sales in Czechia, excluding cars, showed a notable 4.4% year-on-year increase in June, signaling a rebound in consumer spending: particularly significant given the backdrop of rising inflation and global economic headwinds. The resilience of the Czech retail sector could be attributed to strong labour markets and consumer confidence, which have been key drivers of CEE’s economic activity.

In Hungary, the trade surplus of EUR 1.1bn in June stands out as a positive development, contributing to the country’s overall economic stability. Hungary’s robust export sector, particularly in auto and machinery, has played a pivotal role in maintaining this surplus, despite global supply chain disruptions and shifting demand patterns. Hungary’s trade dynamics are likely to remain favourable in the near term, supported by ongoing investments in industrial capacity and export-oriented industries.

Green tech, infrastructure, digitalisation to drive growth

CEE is set for moderate economic growth, albeit with significant regional disparities, Erste concludes. The continued adoption of green technologies and investments in infrastructure and digitalisation are expected to be key growth drivers, while external risks include geopolitical tensions and global market volatility.

The CEE region’s ability to navigate these challenges will depend on coordinated policy responses and strategic investments in sustainable development. As the region continues to integrate with broader European and global markets, maintaining economic resilience and fostering innovation will be critical to ensuring long-term growth and prosperity.

Erste concludes that achieving sustainable economic growth and environmental goals will be critical in shaping future policies and investment strategies in CEE.

Monetary policy flexibility key for CEE

Inflation remains a central concern for the CEE region, with varying impacts across different countries. The report notes that while inflationary pressures have begun to ease in some parts of the region, they continue to pose challenges for monetary policy. Central banks in the CEE have responded with a mix of interest rate hikes and other measures to curb inflation and stabilize their economies.

The National Bank of Romania has taken a cautious approach, balancing the need to control inflation with the risks of dampening economic growth. Meanwhile, the Czech National Bank has maintained a relatively tight monetary stance, reflecting concerns about wage-driven inflation and the potential for overheating in certain sectors. The report emphasizes that monetary policy in the CEE will need to remain adaptive, as global economic conditions and energy prices continue to influence inflation trajectories.