Central and Eastern Europe charges ahead

Central and Eastern Europe has seen a dramatic turnaround in its fortunes, with unemployment down, confidence up and stockmarkets rallying.

Andrew Van Sickle
By
published
in Features

"The speed and scale of Europe's economic recovery has taken almost everyone by surprise," says Simon Nixon in The Wall Street Journal. And "nowhere has the turnaround been more impressive than in central and eastern Europe [CEE]." In the third quarter, Romania expanded by 8.6% year-on-year. The Czech economy grew by 5%; Poland's by 4.7%, the fastest pace since 2011. It's all a far cry from the deep recessions and years of austerity that followed the bursting of bubbles blown up by external credit when the global banking crisis hit.

The region depends on exports to the single currency area, so the eurozone growth bounce has stimulated demand. There should be plenty more momentum where that came from. Germany's Ifo business confidence indicator has just reached a new all-time high, while the eurozone PMI index covering both manufacturing and services has just reached a fresh six-year high. Emerging European heavyweight Russia is rebounding from the nasty recession caused by the oil price slump in 2014.

The cheer has spread to domestic markets in CEE as unemployment has gradually eased, while government spending has also fuelled confidence. Regional wages have risen by 4.5% a year since 2014, according to the IMF. Strong economic and wage growth suggest that "interest rates will be hiked sooner and by more than most expect across the region", as Liam Carson of Capital Economics points out on Bloomberg. But that seems unlikely to snuff out the rally in regional equities. Global growth and liquidity remain auspicious and local equities are reasonable enough to entice bargain-hunters. According to StarCapital.de, emerging Europe is on a cyclically adjusted p/e of 8.9, with Russia and the Czech Republic looking enticing at 5.6 and 9.3 respectively.

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Andrew Van Sickle
Andrew Van Sickle
Editor, MoneyWeek

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.

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