ALBAWABA – Eastern European Union (EU) economies are struggling as Hungary plunges deeper into recession for the longest economic contraction in at least 28 years, the statistics office announced Wednesday.
Hungary’s economy shrank 0.3 percent from April to June compared with the previous three months for the fourth consecutive quarter, against the expectations of Bloomberg’s analysts.
A recent Bloomberg survey of economists and analysts priced a 0.2 percent growth rate for Hungary.
Contrarily, the economy has shrunk 2.4 percent from a year earlier.
Out of the entire eastern EU region, Romania has been an outlier, with steady advances of gross domestic product since the pandemic.
Romania’s economy expanded by 0.9% on a quarterly basis, and 1.1 percent year-on-year, according to data published Wednesday.
Elsewhere in the region, Slovakia grew 1.5% on an annual basis, beating expectations, while Serbia posted stronger-than-expected 1.7% growth from a year earlier, according to Bloomberg.
Otherwise, entire region is suffering, the New York-based news agency reported.
The impact of Russia’s invasion has driven inflation to double digits in Europe’s worst cost-of-living crisis in decades and prompted central banks to clamp down by raising interest rates.
Higher interest rates have weighed on spending and consumption in the Eastern EU region, as in the rest of the world. This has stifled economic expansion for most of the economies from the Baltic to the Black Sea, as reported by Bloomberg.
Tomas Dvorak, a senior economist at Oxford Economics, said the constricting impact of inflation and tighter monetary policy should have begun to ease at the end of last quarter. Even as weak demand in the euro area is crimping demand for exports, with Hungary plunging deeper into recession, along with other Eastern EU countries.
The trend even extends further across the region, with the Czech Republic’s economy growing just 0.1 percent from the previous quarter. Even though inflation there fell to single digits for the first time in 16 months in June, according to Bloomberg.
“As inflation eases and central banks increasingly look toward normalizing policy, domestic demand should see some pick-up,” Dvorak said in an email before the Hungarian data release. “But we think this will be very gradual, not reaching any significant speed before the end of the year.”
