Leading Indicators Point to Weaker Growth
Economic growth in the Central and Eastern European countries (CEE), which was solid in the first half of the year, is facing challenges. Early indicators such as the purchasing managers’ indices point to a possible slowdown, which is a negative signal for future growth.
The CEE economy is strongly linked to developments in the EU, particularly Germany, which is currently once again presenting itself as the “sick man of Europe”. Despite stable labor markets and moderate inflation of 3-4% in the CEE region, the question of whether a recession is imminent in the USA remains open. However, if there is no recession in the USA, a broad recession in Europe is also considered unlikely. While the global economy as a whole is weakening, there are no clear fault lines pointing to an immediate crisis.
At the same time, Russia and Turkey remain hotspots of inflation. The economic situation in Turkey is particularly worrying as the country remains on an unsustainable path. Despite a moderate slowdown in inflation, the economic situation remains precarious and geopolitical risks continue to exacerbate the situation. With a current inflation rate of 60% and an uncertain political future under President Erdogan, who is in poor health, the situation remains extremely stressful for the population. Forecasts suggest that inflation could fall to 30% by the end of the year, but there is a risk that the Turkish central bank will cut interest rates too soon and trigger a new wave of inflation.
Despite the economic tensions, the global economy remains structurally stable, albeit burdened by high debt loads in the long term. The need for far-reaching, disruptive changes could increase in the future in order to find sustainable solutions to the existing challenges.
In Russia, a military setback by Ukraine led to a devaluation of the rouble, but this devaluation may now have bottomed out as Russia continues to assert itself in Ukraine. In the long term, the global economy remains burdened by structural problems such as high debt. While there is no immediate threat of crisis in the short term, in the long term it may be necessary to make profound structural changes to ensure sustainable stability. The current approach offers short-term benefits but does not solve the underlying problems that need to be addressed in the long term.
