Navigating Current Account Challenges: Impact of Energy Prices and Tourism Sector on CEE Economies
Aa
Share
Bringing it all together, Figure 11 summarises all that we were trying to focus on. The current account is the most sensitive and most complex indicator representing an overall picture of the merchandise trade, tourism and energy-related shocks.
Increased energy prices have played by far the largest role in the deterioration of the current accounts of each country since 2019 and price reversals should ensure a reversal of deteriorating trends. Hungary proved to be impacted the most by these combined shocks which puts it in a position to gain the most in a recovery period.
Hungary stands out with its relatively large tourism sector and, at the same time, as being one of the most open economies in Europe, hence exposed to global goods and services trade shocks (be it positive or negative). For Romania, on the other hand, we do not expect to see significant gains from a reversal of the tide.
At the margin, it could be argued that the Czech Republic could gain more than Poland on these themes given its more open economy – although in reality the diverging fiscal stances of these countries (ongoing loose fiscal policy in Poland and tight fiscal policy in the Czech Republic) will have a far greater impact on growth over the next two years.
Despite the partial increase in Turkey's share in world exports, the current account deficit reached the highest level of the past five years recently as import costs increased much more than export revenues. Given this backdrop, lower energy prices and a continuing strength of the tourism sector will remain key for Turkey’s external outlook.
Current account evolution by components, 2022 vs 2019 (% of GDP)
However, domestic factors should play a more important role to contain imbalances in the near term as:
(1) a change in policy mix towards a tighter stance to control domestic demand, and hence import demand; and
(2) the likely normalisation of gold imports on the back of improving confidence, should help narrow the current account deficit.
