Navigating Global Trade: Insights into CEE Countries' Exposure and Opportunities

If we take a helicopter view, our selected CEE countries as a group are well integrated into global trade and the region plays an important role in global value chains. However, if we focus in, we can find a lot of differences in the exposure to external shocks in merchandise trade. A regular talking point here is the faster-growing regions in merchandise trade.

 

Unsurprisingly, the direct exposure of the CEE countries is greatest towards the EU (60-85%), with one exception. This is Turkey, where the EU accounts for 30-35% of exports and imports. Thus, Turkey’s trade structure looks less concentrated, making trade more resilient to external shocks, but more dependent on the foreign policy balancing. Meanwhile, other CEE countries, like the Czech Republic, Romania and Hungary are more heavily dependent on the EU with 70-80% share of external trade.

 

CEE foreign trade and ties to EU (% of GDP)

 

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Looking at the question of whether trade with China can be a key differentiator, the direct exposure to China is still relatively small in the CEE region, at around 1.3-1.7% of total merchandise exports.

 

However, a pivot eastwards is being recorded in some countries, including Hungary’s ‘Eastern Opening’ policy. Due to geopolitical tensions with the US, China is repositioning itself. Its share in EU imports has increased from 7% to 9%, while in US imports China’s share has dropped from 20% to 15% in recent years.

 

The main channel of China’s expected increase in CEE trade could therefore manifest itself not directly, but through a potential increase in CEE’s trade with the EU. As an example, the 1Q23 data suggests that Germany saw imports from Poland and Romania each increase 17% YoY with a 10% YoY drop in Chinese imports (and an 86% YoY drop in Russian supplies).