Supply Chain Disruptions In Central Europe

Summary

• Even if the coronavirus disease 2019 (COVID-19) virus pandemic does not trigger further country-wide restrictions, optimism regarding the short-term outlook for the Central and Eastern European (CEE) region is diminishing, as countries face shortages and delays along the supply chain.
• The logistics crunch has contributed to a surge in producer prices, further affected by rising energy and transportation costs, as well as a shortage of skilled labour.
• The shortages are becoming more widespread across sectors with the most broad-based shortages felt in motor vehicle manufacturing, computer and electronics, as well as rubber and plastics.
• IHS Markit's vulnerability index shows that Hungary, Slovenia, Estonia, and Czechia are facing higher supply-side constraints than other countries.
• Although supply-side constraints pose a negative risk for short-term manufacturing growth, automation and reshoring provide opportunities for CEE countries over the medium to long term as they find a new role amid pandemic-induced structural changes in supply chains.

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Supply-side constraints and labour shortages are rising on many fronts

Amid strong foreign demand, European Commission surveys indicate that new industrial orders continued to rise in most Central European countries during the third quarter, remaining at historically high