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East European party ends with double-digit inflation

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Reuters

Esztergom — Medium In the weeks following Russia's invasion of Ukraine, Western Europe's large economies began to decline. Further east, however, it was still booming, thanks to double-digit wage growth and generous state subsidies in some countries.

No more.

Sharp slowdown in retail sales and plummeting confidence indicators show cost-of-living crisis has caught up to Europe's east Prices rise 15% to 22%, energy costs surge To do.

Analyst cuts his GDP forecasts as household consumption hits, looming risk of recession across Europe.

The family began to tighten their belts. Poles' holidays are getting shorter, Czechs are saving money on restaurant bills, while others are looking for side jobs. In Hungary, where food inflation alone was 22.1% for the year in June, people are spending less on groceries and buying durables. Forint currency boosts import prices.

“One day I went to a bakery and found that a loaf of bread cost 550 forints.

Standing by his bicycle, the gray-bearded Mr. Lajos, who did not give his last name, said that soaring food prices were consuming part of his monthly pension, It said it would be unable to pay its utility bills, which it said would rise after the government last month lifted price caps for what it calls heavy-use households.

, he has his own plan:

``I can heat not only with gas but also with wood...because I have a tile stove. , heat the stove, put on a warm sweater and watch TV.”

Across Hungary, retail sales growth slowed from 10.9% in May to 4.5% annually in June. Furniture and electronics sales were down 4.3%. Victor Orban's government, before the April elections, is now in decline.

Polish retail sales growth also slowed to an annualized 3.2% in June from 8.2% in May. Meanwhile, Czech adjusted retail sales excluding cars and motorcycles fell 6.0% year-on-year in June after a fall of 6.6. % of May, data were presented on Friday.

Peter Virovacz, an analyst at his ING in Budapest, said:

Commercial banks expect demand for loans to decline in the second half of the year and credit conditions to tighten, according to a Hungarian National Bank survey on Friday.

Austerity

Slower domestic demand, higher interest rates, cut government spending and higher costs for businesses are expected to slow economic growth in Central Europe in the second half of the year,

Citigroup said the Hungarian economy could grow by nearly 5% in 2022, but its forecast of 1% next year has downside risks.

"The risk of inflation remaining in his double digits well into 2023 due to prolonged high energy prices and the latest internal Eurozone projections Downside risks are indicated," it said.

The Central Bank of Hungary forecasts growth for 2023 of 2.0% to 3.0% and is expected to release new forecasts in September.

According to government forecasts, the Polish economy is expected to grow by 3.8% this year and 3.2% in 2023.

The Czech Central Bank, which first called for a halt to the rate hike cycle on Thursday, said the economy would contract by 0.4% in the fourth quarter of 2022, compared to 1% in the first quarter of 2023.

“Our baseline scenario includes a mild recession (technical recession). Two consecutive quarters of quarterly decline…This is a healthy It's a recession, to keep inflation down," said Governor Ares Mihir.

According to travel website Noclegi.pl, the summer is still expected to continue the boom in the tourism sector, but Poles are starting to cut back on travel.

"This season has been characterized by an average of one day less travel and postponed bookings until the last minute," said Noclegi.pl expert Natalia Jaworska. increase. Poles also began to save food.

Data from various restaurant payment services, such as Sodexo, show that restaurants in the Czech Republic are also spending less. According to the latest survey conducted in June by the STEM pollster, 80% of Czech households have cut or limited their purchases due to rising electricity prices.

The Czech consumer confidence index hit a new low in July, according to a monthly survey by the Statistical Office, while the Hungarian consumer confidence index dropped to a new low in July, according to a survey by think tank GKI. plunged to its lowest level since April 2020. First wave of the COVID-19 pandemic.

43-year-old Czech film producer Martin Hulovec said he wasn't worried about his current income, but he wasn't too optimistic about the future.

"The hard times that I can deal with right away have not come yet...but they will come," said Hulovec.

"I certainly want more energy savings...I definitely don't buy new for kids, clothing, or sporting goods. You can buy used for half the price." 80}

And he, too, turns on the heating less often when winter comes. (Reporting and writing by Krisztina Than; additional reporting by Jason Hovet and Robert Muller in Prague; additional reporting by Anna Wlodarczak-Semczuk in Warsaw; editing by Hugh Lawson)