As of: February 2, 2024, 10:12 a.m
By: Lars-Eric Nievelstein
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Press
Split
The EU is economically at a standstill.
In the east of the Union, however, the states have developed into a driving force.
This was revealed by a recent investigation.
Vienna – The countries in the east and southeast of Europe are increasingly becoming the driving force of the EU economy.
Economists at the Vienna Institute for Comparative Economic Research (WIIW) see significantly more positive signs for the economic development of these countries.
If the forecast GDP growth of 2.5 percent actually materializes, the eleven Eastern European EU members would far exceed the union's overall growth.
The institute has a warning for Ukraine.
Forecasted growth of the Eastern European EU countries |
2.5 percent |
|---|---|
EU growth in the fourth quarter of 2023 |
0.5 percent (Eurostat) |
Expected growth of Ukraine |
3.0 percent |
Falling inflation is ensuring economic recovery in Eastern Europe
The wiiw identified the trigger for this development as “drastically falling inflation”, sharply rising real wages and “a rebound in private consumption in combination with impending cuts in key interest rates”.
All of these factors are intended to get growth back on track.
“The hoped-for recovery of the German economy, which is so important for the region, from the middle of the year is of course also a key factor,” said Richard Grieveson, deputy director of the wiiw and main author of the winter forecast, to the
dpa
press agency .
Eastern Europe as an economic engine – economists predict significant growth © IMAGO / Markus Tischler
For 2024, the eastern region of the EU is expected to grow by an average of 2.5 percent.
In the previous year it was 0.6 percent, which was below average.
“The East-Central European EU members are continuing the catch-up process with Western Europe that was interrupted last year,” explains Grieveson.
Growth of 2.5 percent is also on paper for the Visegrád countries Poland, the Czech Republic, Slovakia and Hungary.
Poland and Hungary are benefiting from current political developments and increased access to EU funds.
To explain this: Hungary's head of state Viktor Orbán has been opposed to aid to Ukraine for a long time.
He hopes that funds that have been frozen due to rule of law concerns will be released again.
Trump re-election and escalating wars as the biggest risk factors
Growth is expected to be even stronger among the southeastern European EU members.
Growth of 3.0 percent is forecast for Romania and 2.6 percent for Croatia.
Funds from the NextGenerationEU Corona reconstruction fund flow here and support the economy.
This is an 806.9 billion euro economic stimulus package that is intended to create “new opportunities and jobs” for “our Europe of tomorrow”.
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However, the institute also sees considerable risks of a further decline in economic performance.
Specifically, it mentions the continuation of the recession in Germany, an escalation of wars (in both Ukraine and Israel), disruptions to supply chains and the election of Donald Trump.
According to Grieveson, it is the geopolitical risks that have the greatest risk potential.
Ukraine's growth depends on Western aid
The wiiw also forecasts 3.0 percent growth in Ukraine.
However, this is subject to two conditions.
On the one hand, this is about the further development of the war and, on the other hand, about what aid money the West is making available to the country.
Ukraine has certainly had successes - such as the start of EU accession negotiations or the increase in agricultural exports by ship - but it all depends on Western support.
The ongoing delays in the commitment and disbursement of funds are having a negative impact on confidence in the Ukrainian economy.
The European Commission recently proposed suspending import obligations and quotas for Ukrainian exports to the EU for another year.
“These autonomous trade measures have been in force since June 2022 and represent a mainstay of support for Ukraine and its economy,” the Commission said.
It is about supporting Ukraine “as long as it is necessary.” Specifically, these measures ensured that trade between Ukraine and the EU remained stable and secured Ukrainian imports worth 24.3 billion euros.
0.5 percent growth in the European Union
In the fourth quarter of 2023, adjusted gross domestic product remained stable in both the euro zone and the European Union.
As the statistics office Eurostat announced, there was a slight decline in economic output of 0.1 percent in both zones in the third quarter.
Calculated for the whole of 2023, growth in both zones is expected to be 0.5 percent.
Eurostat based this on preliminary figures.
With material from dpa