We expect Hungarian GDP to have dropped 6.5% y/y in Q3

EMEA Daily

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Review

The release of the Russian Federal budget data for the first 10 months of 2009 showed that the public deficit was much smaller than expected mainly driven by a spending restraint in recent months ahead of the year-end public sector wage rise. Thus public spending is set to increase sharply in the last two months of the year due to scheduled increases in public sector wages and pensions.
Estonian Statistics yesterday published the flash estimate for Q3 GDP growth: GDP declined 15.3% y/y in Q3 09 compared with a fall of 16.1% y/y in Q2 09.The outcome was better than our estimate of -16.5% y/y.

Preview

A relatively interesting day ahead with GDP for Hungary and Czech Republic, and inflation in Poland.
We expect Hungarian GDP to have dropped 6.5% y/y in Q3. However, that is slightly better than the Q2 outturn of -7.5% y/y. The improvement can mostly be explained by a base effect rather than any real stabilisation in economic activity. The GDP release is unlikely to be a major market mover.
We also expect to have seen some improvement in the Czech Q3 GDP numbers: we forecast -4.9% y/y, a slight improvement from -5.5% y/y in Q2 and a bit worse than the consensus expectation of -4.6% y/y.
We expect Polish inflation to have eased to 3.1% y/y in October, down from 3.4% y/y in September. After being stuck around 3.5–5% for a while, inflation is now beginning to come down.

Trading update

Yesterday, the EMEA currencies faced a bit of headwind – with especially the South African rand losing some ground after the recent strengthening. That said, the weakening in other EMEA currencies was relatively limited. The “top scorer” in our EMEA FX is the Polish zloty, which continues to outperform its regional peers.
Even though our Scorecard is still in “positive mode”, it seems the EMEA markets are on a knife’s edge: positive global conditions – including a global liquidity overload – are keeping the markets from falling off a cliff, while the lack of any carry projection is keeping investors from going “all in” on betting on longer-term gains in the EMEA FX (and fixed income markets).

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Published On Fri, Nov 13 2009, 06:40 GMT

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