
Recession to cure inflation? Now stagflation is knocking
In Estonia, inflation over the year has reached 22.8%. Meanwhile, growth in retail sales and industrial output has slowed down.
In Estonia, inflation over the year has reached 22.8%. Meanwhile, growth in retail sales and industrial output has slowed down.
In Q1 employment in Estonia rose by 5.1% YoY, giving hope on the ability to absorb the shock of a fiscal and monetary tightening.
In Poland, second-round effects thrive in an environment of expansionary fiscal policy, buoyant wages growth, and consumption boom.
Although growth in employment accelerated, and the restrictions did not deliver any major setback, the labor force participation rate fell.
Household consumption will keep sustaining the Polish economic growth o\in 2022, and high producer prices will be passed on to final consumers.
The Latvian economy already returned to its pre-pandemic level in 2021, only thanks to household consumption, wage growth and savings.
GDP and consumption booms continue, but price-wage spiral too, as consequence of expansionary economic policy in recent years.
Riga is facing multiple challenges: energy prices, increasingly unemployed, a domestic market fall, global supply chain disruptions.
The example of Estonia suggests that the focus on an efficient allocation of resources works more effectively than a stimulus of demand.
NBP action lags behind other CEE central banks, while authorities pretend the elevated CPI to be a result of external supply shocks.