East EU Economies Defy Virus Gloom to Near Pre-Pandemic Levels

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Economies in the European Union’s east defied downbeat forecasts at the start of 2021, surprising analysts who appeared to overstate the knock-on effect of pandemic restrictions.

Preliminary data released Tuesday showed first-quarter gross domestic product in Romania, Hungary and Bulgaria falling much less than predicted on an annual basis and unexpectedly jumping from the previous three months. The region’s two largest economies -- Poland and the Czech Republic -- released their numbers earlier, also largely exceeding estimates.

Reasons for the outperformance will become clearer when full breakdowns of the figures are published and probably vary between countries. Hungary, for instance, was among the EU’s leading member states for vaccinations, while Romania implemented less stringent virus curbs and enjoyed a construction boom.

One thing analysts agreed on, though, is that the outlook is only going to improve.

“Central European economies are likely to grow faster as they open up,” said Dan Bucsa, an economist at UniCredit Bank AG in London. “We expect economic activity to return to pre-pandemic levels already this year in Hungary, Poland and Romania, with industry and construction rebounding more than tourism and transport services.”

Read more: Hungary Takes Pole Position for EU’s First Rate Hike of 2021

Risks remain. Aside from the pandemic -- which continues to spread aggressively in some parts of the world, threatening new mutations even if inoculation campaigns prove a success -- inflation has prompted Hungary and the Czech Republic to ponder raising interest rates.

What’s more, a labor drought that had weighed on eastern Europe before Covid-19 struck is re-emerging, compounding global supply-chain disruptions as demand surges back.

For now, however, officials like Romanian Finance Minister Alexandru Nazare are upbeat.

“Romania’s economy almost entirely recovered from the pandemic-induced contraction in the first quarter,” he said on Facebook. “We’re heading in the right direction but I once again reiterate that Romania still needs prudence and stability.”

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