Western sanctions so far have not hurt Russia’s economy as much as expected, and the 23 countries in Central, Eastern and Southeast Europe have weathered the fallout from the Russian attack on Ukraine better than feared. But that will change in the coming months, warn economists at the Vienna Institute for International Economic Comparisons (WIIW). Ukraine’s economy has collapsed by a third this year as a result of the war.
As the economic recovery after the pandemic was unexpectedly strong in many countries in the region, the WIIW revised its economic forecast upwards. For 2022 as a whole, growth of 3.9% is expected for the EU member states of Central, Eastern and South-Eastern Europe, 3.1% for the Western Balkan countries and 5.1% for Turkey. While this is significantly lower everywhere than it was in 2021, it is still surprisingly good given the war in Ukraine.
possible recession
However, the outlook for the near future is not so good: inflation is in double digits across the region, in EU member states it will average 13 percent this year and is expected to stabilize to eight percent next year, from according to the forecast.
Above all, expensive food and skyrocketing energy prices pose a threat: “If gas has to be rationed in some places in winter, individual countries could go into recession,” says Branimir Jovanovic, lead author of the WWII autumn forecast. world. “The worst is yet to come for Eastern Europe.”
Russia slowdown weaker than expected
Russia’s economy shrank by just 1.5 percent in the first eight months of this year despite Western sanctions, and inflation dropped below 14 percent. For the year as a whole, the institute forecasts a 3.5% decline in Russian economic output, meaning the recession will be much milder than anticipated in the summer (down 7%).
Thanks to high energy prices, the reorientation of trade to Asia and increased military spending, the Russian economy has partially adapted to the new realities. However, the recently announced partial mobilization is a game-changer and will greatly exacerbate the crisis.