Macro: COVID-19 CEE Compendium Q4 2020

Economic developments over summer have been playing out broadly as expected. In the second quarter of 2020, the economies of CEE plunged into a deep recession with quarter-on-quarter drops in GDP ranging from -3.2% in Russia to 14.9% in Croatia. The key factor determining the slump had been the severity and the strictness of the imposed lockdown measures. Interestingly, the unemployment rates across the region did not increase as strongly as initially expected, as most countries employed a short working or Kurzarbeit scheme, which is keeping unemployment numbers low for the time being. In summer we observed improvements in most countries regarding the Covid-19 pandemic, but also in the economic situation in the region on the back of substantial monetary and fiscal stimulus. During June, activity indicators showed that people were moving again as before the lockdown measures. Energy usage, though, showed a less clear picture. Industrial output in July was still below the volume of the previous years period, but less so than in the previous months and partly exceeded the previous years level in August. Retail sales recovered even earlier and more pronounced in May-June. However, we see here the first setbacks in the data in August, when sales below the previous years value in several countries. Given better Q2 GDP date we improved the 2020 outlook for the Czech Republic, Romania and Poland, while we became more negative on Hungary and Croatia, while becoming in general slightly more cautious regarding growth in 2021.

This Research was produced and first published by Raiffeisen Bank International AG which is supervised by the Austrian Financial Market Authority and the National Bank of Austria.