Yesterday, we got yet another sad confirmation of the depth of the crisis in the Lithuanian economy with the release of industrial production (IP) numbers for April. Industrial production dropped a further 25.5% y/y – down from -17.9% y/y in March. Hence, there are still no signs of stabilisation in Lithuanian industry.
Preview
There are very few EMEA macro numbers out today. Most interesting will be numbers for foreign tourist arrivals in Turkey in April. In March the number of arrivals dropped by 7.5% y/y – we expect the decline to have continued in April.
Turkish tourism is clearly suffering from the global economic crisis, but that said, the decline in Turkish tourism seems to be somewhat smaller than in other South European tourist destinations. An explanation for this might be the weakening of the lira versus euro – which has made Turkey a relatively cheaper tourist destination than for example, Greece, Spain and Portugal.
Today we publish New Europe Weekly looking into next week. Key events next week are rate decisions in Poland, Hungary and South Africa, and Q1 GDP for Poland and South Africa.
Trading update
With very little news on the agenda in EMEA today, it is likely that EMEA markets will continue to take the lead from global markets. The markets are also likely to start focusing on next week’s events, in particular the rate decisions in Hungary, Poland, the Czech Republic and South Africa, and GDP numbers in Poland and South Africa.
Next week’s Polish news flow might turn the markets a bit “schizophrenic”, as we expect Polish GDP numbers to surprise on the downside and the Polish central bank to signal that it will keep rates on hold for some time to come, which could (slightly) disappoint those who are still looking for rate cuts. Hence, keep an eye on Polish rates – will weaker GDP numbers send rates down, or will a “wait-and-see” message from NBP send rates higher?
In Hungary we see upside risks for rates. Current market pricing suggests that the Hungarian central bank (MNB) will cut roughly 200bp over the coming 9-12 months down to 7.50%. Despite the deep recession in the Hungarian economy we do not think that the MNB will have room to cut rates further this year since the inflation outlook remains uncertain and there are risks of a renewed sell-off in the forint. Hence, we see value in playing higher short-term rates in Hungarian money markets.
