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Central Europe is booming, says Pictet

Record low unemployment and strong consumer spending are boosting region’s economies


Tight labour market conditions and record low unemployment rates are boosting consumer spending across Central and Eastern European (CEE) countries.

Christopher Bannon, senior investment manager at Pictet Asset Management, said Central European countries are showing exceptionally strong rates of growth.

In an analysis of Central and Eastern European economies, the Pictet fund manager said the economies have managed “surprisingly robust growth rates,” attributing the performance to “buoyant domestic demand, led by consumer credit.”

The CEE4 countries, which include Poland, Hungary, Romania and the Czech Republic, have seen strong nominal wage growth since the start of the year, with the Czech Republic increasing by 7.1 per cent, while Romania is up 21.6 per, compared with just 2.4 per cent for the Eurozone.

Mr Bannon added that both headline and core inflation rates have also picked up across the CEE4.

He said: “With inflation pressures creeping up, central banks would be expected to ramp up measures to contain inflation. However, this has been the missing piece of the puzzle so far, except in the Czech Republic and, to a limited extent, in Romania.

“The most worrying example is Romania, where inflation has surged above the targeting range, after the central bank started normalising monetary policy last year but then paused the tightening stance.”

He warned investors looking at the CEE4 to “watch out for a normalisation of monetary policy soon”.

“This is justified by the upbeat domestic conditions which are feeding into higher core inflation,” he added.

“Nevertheless, investors also need to watch out for some economies at risk due to rising current account deficits, deteriorating public finances and increasing public debt.”