2023 will prove another tough year for global growth. Central bankers in most advanced economies will keep their collective foot on the monetary brake pedal. Yet trade volumes and tourism should improve, plus energy prices are substantially lower than a year ago. In this article, we take a look at how selected Central and Eastern European (CEE) economies could benefit on a relative basis.

Key observations

• Looking at what an improvement in the external trade environment could mean for the region, we note Hungary and the Czech Republic are the more open economies, Poland and Romania the more closed. Turkey’s more geographically diversified trade mix has helped. Better trade trends should prove an important offset to weaker domestic demand in the region, although we caution that foreign value-add in exports is quite high. Given the recent Turkish lira depreciation, sectors using imported inputs at the lowest rate, eg, labour-intensive industries, could fare better.

• The spike in energy prices did most of the damage to the external imbalances over 2021-22 and falling prices should now be a welcome boon – especially to Hungary and Turkey. Lower energy prices may also give governments more room to pressure margins of the fuel retailers – helping to make the case for rate cuts especially in the CE4 region later this year. Romania’s relative self-sufficiency in energy suggests it will not be a major beneficiary of this story.

• When it comes to tourism, none of the selected CEE countries we cover in this article come close to the near 20% of GDP that tourism represents in the likes of Croatia, Bulgaria and Montenegro. Yet a further recovery in tourism back to pre-2019 levels would certainly be positive for the likes of Turkey, Hungary and Poland – countries that run net positive balances in terms of tourism receipts.

Current account evolution by components: 2022 vs 2019 (% of GDP)