Europe: CEE industry faces medium-term challenges and opportunities

We think the Central and Eastern European (CEE) industrial sectors should benefit from a pick-up in domestic and, later, external demand in H2 2024 and 2025. But the outlook is much less clear in the medium term, when major transformational requirements will be placed on the sector.

• Our baseline projects CEE industrial production will grow by an average rate of 2.8% in 2025-2030, above the 2.4% we expect in Germany and the eurozone. Manufacturing productivity growth will outstrip Western Europe too. The balance of risks is to the downside, but with ample growth opportunities, and we identify the key factors that will shape the medium-term outlook.
• Nearshoring of production and shortening of the supply chain are the biggest opportunities for CEE industries. External demand and in particular but the capital-intensive green transition could benefit CEE manufacturers if they adapt to new technologies.
• We think that CEE is still broadly competitive in terms of labour costs. Despite the fast catch-up in nominal labour costs over the last decade, they are still less than half of the EU average. But poor demographic outlook, biting labour shortages, and the ongoing fragmentation of global trade coupled with a rise of industrial policies are all headwinds for the CEE industries.

To learn more, about our forecasts for the CEE industrial sectors, please submit the form to download the full report.