Economic output is plummeting as governments try to fight multiple crises
EU countries in Central and Eastern Europe experienced an economic slowdown in the third quarter of this year, with Hungary and the Czech Republic sliding into technical recessions, Bloomberg reported on Tuesday.
The cost of living crisis, which stems largely from skyrocketing energy costs, is hitting households and businesses with unprecedented inflation and soaring interest rates across the bloc.
Poland, the region’s biggest economy, saw annualised GDP growth of 3.5% between July and September, compared to 5.5% in the previous quarter. Output in Romania and Hungary grew 4%, down from 5.1% and 6.5% respectively.
To tackle spiraling inflation, Poland has been conducting a year-long campaign of interest rate hikes, causing a collapse in demand for mortgage loans.
In an effort to rein in the economic crunch, Hungary took to capping prices for staple foods after a 40% jump in costs in October. Analysts say the country is now facing the prospect of two consecutive quarterly declines in economic output with a “gloomy” near-term outlook.
“The coming quarters could see a further slowdown in economic activity, with a trough currently seen early next year,” an analyst at Erste Bank Hungary, Janos Nagy, wrote in a note.
Meanwhile the Czech Finance Ministry has suggested the country has already entered a “shallow” recession after a dip in the third quarter. While holding back on rate hikes, Prague is embarking on tighter fiscal spending. The governor of the Czech Central Bank, Ales Michl, called for a cap on salary growth on Monday, and some companies have already suspended hiring or reduced staffing levels.
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