The economy of the EU's 11 member states in Central and Eastern Europe (CEE-11), including Bulgaria, Croatia, Romania and Slovenia, will expand by about 4.6% in 2021, Berlin-based Scope Ratings said, raising by 0.5 percentage points its projection made in December.
The economic output of the CEE-11 countries is expected to recover to pre-crisis levels by next year, but the speed of recovery will vary, Scope said in its latest report, Central and Eastern Europe Sovereign Outlook 2021, on Wednesday.
Scope expects the economic growth of the CEE-11 countries to slightly accelerate to 4.7% in 2022.
However, the projection assumes that vaccine accessibility gradually increases in countries of the region over 2021-22 and that most Scope-rated CEE countries remain on track to inoculate 70% of populations by the end of this year, the credit ratings agency noted.
Government fiscal policies will contribute to the economic recovery, but this will increase government debt. At the same time, higher debt financing costs can be anticipated as increasing inflationary pressure could lead to rates tightening.
Reforms that address tight labour markets, skilled labour shortages and increase longer-term labour supply will prove pivotal for sustaining economic rebounds and for the outlook for sovereign ratings, Scope said.
"The main risks to the short-term economic recovery relate to developments surrounding the public-health crisis, delays in vaccination, as well as risk around an abrupt tightening of global financial conditions," the report reads.
Romania's economy should grow by 4.8% in 2021, and by 4.7% in 2022, according to Scope Ratings.
Scope expects Slovenia to grow around 4.5% in 2021 and 4.6% in 2022, while Bulgaria's economy is forecast to expand by 5.4% in 2021 and 4.7% in 2022.
Croatia's economic growth is seen at 5% this year and at 5.8% next year, Scope also said.
The GDP of the CEE-11 countries dropped by 3.9% last year.