Key Takeaways:

I. Monetary policy easing is significantly less effective in CESEE (average pass-through 40-50%) due to structural financial fragilities.

II. Key manufacturing sectors face quantifiable erosion (5-7% YoY output fall in early 2025) driven by rising costs and declining competitiveness.

III. Persistent high wage growth (8-10%) fuels services inflation (>5%), creating structural inflation inertia and complicating fiscal adjustments.

Recent growth downgrades, notably the IMF's 0.3–0.5 percentage point reduction for CESEE economies in 2025, signal more than a cyclical slowdown; they expose profound structural vulnerabilities amplified by a triple transition – geopolitical, green, and digital. This revision, while significant, potentially underestimates risks stemming from deeply impaired monetary policy transmission, accelerating manufacturing base erosion, and entrenched inflationary feedback loops. Our analysis, grounded in quantitative impact assessment and predictive modeling, reveals how these interconnected factors create a complex risk matrix for investors and corporations, necessitating a granular understanding of regional dynamics beyond aggregate GDP forecasts. The challenges are not merely macroeconomic; they are structural, sectoral, and require data-driven strategic foresight.

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Further Reads

I. DOE Releases New Report Evaluating Increase in Electricity Demand from Data Centers | Department of Energy

II. 2024 United States Data Center Energy Usage Report

III. Medium- and Long-Term Challenges for the Electricity Grid in Texas (i.e., ERCOT)