East European Growth Strong Amid General European Drop

The European Union’s ex-communist contingent probably weathered a lackluster economic performance by the euro area last quarter.

While a boom in the continent’s east has passed its peak, data due Wednesday are likely to reflect resilience in the face of Brexit upheaval and manufacturing weakness in Germany, a key destination  for exports.

Growth slowed a little in the Czech Republic, Hungary and Poland, while holding steady in Bulgaria, Slovakia and Romania, according to Bloomberg surveys of analysts. But all expanded by at least twice the pace of the eurozone on an annual basis.

“Growth in central Europe appears to have held up well as strong domestic demand offset the impact of continued weakness in eurozone export markets,” said Liam Peach, an economist at Capital Economics Ltd. in London.

While inflation is creeping up in some parts of the region and central banks there have responded by raising interest rates, borrowing costs in many countries remain at or near historic lows. Poland is set to extend an unprecedented pause in record-low rates on Wednesday and the nation’s prime minister has claimed an “economic miracle.”

There are more reasons for optimism. Poland has announced about $10 billion of election-year stimulus, boosting family benefits and trimming some taxes. Higher salaries, spurred by a labor shortage, are fueling domestic consumption in Hungary, where BMW AG is supposed to start work on a 1.2 billion contact  this year.

Tests remain. The European Commission sees Romania’s budget deficit blasting through the bloc’s limits starting in 2019 and 2020, while global trade tensions are once again roiling markets. For now, at least, confidence remains high across the region.

Hungary’s biggest lender, OTP Bank Nyrt., has been on an acquisition spree in the Balkans and now operates in more than 10 countries. After notching a record 1 billion-euro ($1.1 billion) profit in 2018, Deputy Chief Executive Officer Laszlo Bencsik remains upbeat.

“Hungarian economic growth is expected to stand out among the countries our group operates in, though the others won’t be bad either,” he said last week. “These countries will probably keep growing, not as fast as Hungary but relatively dynamically.”