Industry, engineering, worker, laborer – illustration photo.
Brussels/Prague – At the end of last year, the economies of the countries of the Visegrad Group (V4) struggled with the effects of high inflation, which had a negative impact on the economic performance of these countries. The gross domestic product (GDP) of Hungary, the Czech Republic and Poland decreased in the fourth quarter compared to the previous quarter, and Hungary and the Czech Republic fell into recession. Only Slovakia managed to maintain growth. According to economists, weak growth in the region was only temporary.
Hungary's economy shrank 0.4 percent in the fourth quarter after a 0.7 percent drop in the previous quarter. The Czech economy shrank by 0.3 percent, while in the third quarter its decline amounted to 0.2 percent. Both countries thus met the definition of a technical recession.
The Polish economy fell by 2.4 percent in the last three months of the year. Although Poland recorded a decline in two quarters last year, the first decline was already in the second quarter, which was followed by growth in the third quarter. This means that Poland has avoided recession.
The Slovak economy performed best at the end of the year. It grew by 0.3 percent, the same pace as in the third quarter. Slovakia is the only one of the V4 countries that is a member of the Eurozone. Across the EU, gross domestic product stagnated, but for example the economies of Romania, Bulgaria and some other countries on the eastern flank of the union recorded growth.
“GDP growth in the countries of Central and Eastern Europe was lower than in the eurozone in the fourth quarter. Nevertheless, we consider the recent weakening to be temporary,” said Polish Economic Institute (PIE) analyst Jakub Rybacki. He pointed out that activity indices indicate greater expansion in the region compared to Germany, growth should also be supported by investment spending.
This year, according to analysts, the economies of the countries of Central and Eastern Europe should surpass the Eurozone. According to a survey by Focus Economics, analysts expect economic growth in the region of almost one percent, while they estimate GDP growth in the Eurozone at only 0.1 percent.
Growth in the countries of Central and Eastern Europe will probably be supported by the manufacturing industry and greater spending on investment. Businesses in Central and Eastern Europe are also likely to expand investments to reduce energy consumption. The greatest risk is associated with the construction sector, mainly due to high interest rates compared to the Eurozone. This will probably dampen the activity on the real estate market.
Despite the recession at the end of the year, the Hungarian economy showed an increase of 4.6 percent for the whole of last year. This was one of the fastest year-round growths in Central Europe.
The central banks of Central European countries started to raise interest rates in 2021. They thus started to tighten monetary policy before the big central banks in the world started to fight inflation. . But they gradually switched to a stable monetary policy to mitigate the slowdown in the growth rate.