The OeNB and the Bank of Finland Institute for Economies in Transition (BOFIT) compile semiannual forecasts of economic developments in selected CESEE countries. They are based on a broad range of available information, including country-specific time series models for Bulgaria, Croatia, the Czech Republic, Hungary, Poland and Romania. The projections for Russia were prepared by the BOFIT and are based on an SVAR model.
OeNB-BOFIT outlook for selected CESEE countries
Surprisingly strong rebound in CESEE-6, continued moderate growth in Russia
Economic growth in Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania (CESEE-6) will rise to 4.1% per annum in 2017. We expect some moderation thereafter but GDP growth will be at or above 3% in all CESEE-6 countries in 2018 and 2019. The average growth rate will amount to 3.5% in 2018 and to 3.3% in 2019. Overall, strong domestic demand and export growth will drive up economic performance in 2017. Romania is expected to be the growth leader over the entire projection horizon. Our expectations are more or less in line with the forecasts of other institutions. As the economic outcome in the first half of 2017 was stronger than expected – particularly in the Czech Republic, Poland and Romania – the current projection was revised noticeably upward compared with our spring forecast. Export growth will also be stronger, driven by the upward revision of euro area import demand and higher world trade growth. Yet, a higher CESEE-6 growth forecast for 2017 will not translate into higher economic convergence with the euro area due to a stronger-than-expected euro area recovery. The growth differential will amount to 1.9 percentage points in 2017, 1.7 percentage points in 2018 and 1.6 percentage points in 2019.
Annual GDP growth in Russia will be 1.5% over the whole forecast horizon. The projection is unchanged compared to our spring forecast. The recovery is supported by improving domestic demand and accelerating export growth. The Russian economy is growing near to its potential, and achieving sustainably higher growth would require major structural reforms, which are not to be expected over the projection horizon. The oil price assumption used by the Bank of Finland is based on the preceding ten-day averages of Brent futures. We expect the oil price to rise from USD 44 per barrel in 2016 to USD 51 per barrel in 2017 and further to USD 53 per barrel in 2019. The cut-off date for the oil price assumption was September 13, 2017.
Cut-off date for data: October 2, 2017.