Erste Group recently released analysis from its research team suggesting that while economic growth in Central and Eastern Europe (CEE) has been improving substantially in the past year, the region's economy does not show signs of overheating.
One sign analysts look for to predict an
overheating economy are current account deficits, as emerging imbalances can
trigger material deterioration there, according to a press release.
“While current account deficits are not
problematic in and of themselves, given that converging economies need to
attract foreign capital, the fact that in CEE they were excessive and often
debt-financed increased the vulnerability of the economies during the financial
crisis in 2008-09,” Erste Group Head of CEE Macro/FI Research Juraj Kotian said in the release. “Since then, however, CEE economies have rebalanced and made tremendous
improvements to their current account balances, even turning them into
surpluses in Croatia, the Czech Republic, Hungary, Slovenia and Slovakia.”
The Erste Group analysts pointed
out that inflation rates, while rising, are at anticipated levels, and central
banks in the region are not expected to adjust interest rates in response at
“We expect central banks will rather remain
in wait-and-see mode and not act until they see core inflation being settled
above the target for a longer time or with a safe margin,” CEE Macro/FI
Research Chief Analyst Zoltan Arokszallasi said,
Erste Group research does not anticipate Central, Eastern European economy overheating
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