Economic environment

Ten years after the outbreak of the 2008 financial crisis in the US and the far-reaching consequences for the global economy that led to many regulatory changes and, on occasion, unique fiscal measures aimed at containing the negative effects, the International Monetary Fund (IMF) is expecting robust global economic growth of 3.7% in both 2018 and 2019, thereby continuing at the same level as in 2017. Increasing uncertainty in connection with the much-discussed Brexit, the trade conflict between the US and China and the issue of immigration and increasing protectionism in local economies nevertheless also entail risks for future economic growth.

In 2018 economic growth has already slowed in the Eurozone, which recorded real GDP growth of 2.0%, after 2.4% in 2017. The Austrian Institute of Economic Research (WIFO) is expecting faster growth of 2.7% for Austria in 2018. In spite of the adjustment made to the previous forecast of 3%, this represents a high, made possible mainly due to industrial production and other expanding economic areas. This growth is also being supported by increasing private household expenditures on consumption. The inflation rate was 2.1% in 2018, which was only slightly above the ECB target for the Eurozone as a whole.

Economic growth in Eastern Europe slowed somewhat in 2018 compared to the previous year. Nevertheless, based on calculations by the Vienna Institute for International Economic Studies (WIIW), real GDP growth averaged 4.2% (after 4.9% in 2017) in the Central and Eastern European countries of the EU, which includes VIG’s markets in the Czech Republic, Slovakia, Poland, Romania, Hungary, Bulgaria and the Baltic states. This is significantly higher than the growth recorded in Austria and the global economy. The strong growth rates of 4.1% and 4.8% recorded in Hungary and Poland in 2017 increased even further to 4.3% and 5.0%, respectively, in 2018. This, together with falling unemployment and low debt ratios, indicates the CEE region is still on a path of convergence with Western Europe.