Moody's: CEE region starts 2020 with negative outlook
Moody's expects CEE growth to remain well over the European Union average.
External headwinds will slow GDP growth to 3.3% in 2020 from 3.8% in 2019. Given broadly stable fiscal deficits, this growth will be sufficient to sustain the decline in already relatively low debt ratios, although performances will vary by country, Moody's said in a 14-page outlook presented in London today.
Resilient domestic demand and accommodative monetary and fiscal policy will support growth this year
, said Steffen Dyck, a Moody's Vice President - Senior Credit Officer and the report's co-author.
"However, the CEE's open economies are vulnerable to the deteriorating global environment and face persistent domestic pressure points," he added.
A dramatic shift in CEE demographics, a potential fall in European Union funding and slowing productivity growth have shifted the focus to structural reforms at a time when the political landscape is becoming less conducive to such reforms.
Further increases in the minimum wage are forecast in CEE countries in 2020 despite the weakening economic environment. Although supportive of short-term economic growth, this risks eroding the region's historical cost competitiveness, increasing unemployment and worsening social inequality.
Moody's projects CEE growth to exceed Eurozone GDP growth by 2.1 percentage points this year and by 1.6 ppts in 2021, after a 2.7-ppt lead it had in 2019.