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Central European Economic Outlook

Fri, Oct 23 2009, 08:59 GMT
by KBC Market Research Desk

KBC Bank

Czech Republic

The fall in industrial output is starting to decelerate due to the one-off impact of the bonus for scrapping cars put in place in Germany. Given low domestic demand, the wave of price reductions is likely to persist and be yet another contributor to the favourable inflation outlook for next year. Hence, the central bank has several more arguments at hand for cutting its base rate.

Hungary

The country has become an exporter of capital as the C/A balance swung into surplus and foreign trade is going to post a huge surplus this (probably more than €2B). No wonder that the S&P rating agency upgraded the outlook for Hungary’s sovereign ratings.

Poland

The Polish economy will remain the economy within the EU, which will not slip into recession this global cycle. That is why we think that markets’ worries about the fiscal outlook are overblown.

Slovakia

The German scrap subsidy helped Slovak manufacturing to moderate its free fall and registered only a mild -4.2% Y/Y decrease in August. Harmonized inflation dipped to a new all time low at 0%. More and more institutions paint a rosier picture of the Slovak economy - EBRD expects +3.5% Y/Y growth in 2010.

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Published on  Fri, Oct 23 2009, 08:59 GMT

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Central European Economic Outlook

Thu, Aug 6 2009, 09:36 GMT
by KBC Market Research Desk

KBC Bank

Czech Republic

Signs of stabilisation and a very modest rise in output are unlikely to occur before the last quarter of this year. Rather than a strong fundamental reversal, this will be primarily a consequence of the low comparative baseline of late 2008. The economic recovery will thus be very slow and vulnerable. Basically, this recovery, as well as the current recession, will depend on foreign markets. Next year should see just a moderate rise, which will, however, not be strong enough to reverse the current negative trend on the labour market. We expect a further rise in unemployment and just a very moderate nominal wage growth.

Hungary

The NBH surprised markets with a 100bp rate cut to 8.5%. The NHB joins the consensus view with a sub-3% mid-term CPI outlook, while recent risk appetite improvement was put behind the bigger rate move. The strengthening HUF trend could have been the real reason behind and risk appetite is a good alternative to this. Risk is that the market will start to expect too large steps for next months and that a rate cut bubble builds. Too low yields would then lead to higher inflation and exchange rate instability around the year-end.

Poland

The industry continued to fall on a year-on-year basis, but the pace of the decline slowed and this was a remarkable progress compared to declines of early 2009. The latest figures confirm our basic scenario that the NBP can easily leave interest rates unchanged until the end of the year. This should also provide room for a further appreciation of the zloty, not only against the euro, but also against its regional neighbours

Slovakia

Ministry of Finance revised its GDP growth forecast to -6.4% and is the most pessimistic forecaster on the market. MoF also admitted the possibility of public finance gap at 6% of GDP.

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Published on  Thu, Aug 6 2009, 09:36 GMT

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Central European Economic Outlook

Wed, Jun 10 2009, 11:03 GMT
by KBC Market Research Desk

KBC Bank

Czech Republic

The Czech economy officially slid into recession due to a considerable drop of foreign demand. The double-digit fall of new industrial orders implies large cuts in production and employment. Low inflation and recession fears move the Czech National Bank to consider interest rate cuts.

Hungary

The new austerity package may dent into domestic consumption in the 3rd quarter, while March industrial production and export data suggest that export-driven industry may have bottomed out. Thus, the outlook could depend on the speed of the export recovery against compressing domestic consumption. However, this would shift the structure of GDP towards a more healthy external balance.

Poland

Poland, as the only Central European country to do so, reported positive economic growth for the first quarter of 2009 this year. Nevertheless we think that it is unlikely for Poland to post positive growth for this year as a whole for several reasons. Particularly the rise in investment, which might be partly fuelled by inventories in the first quarter of the year, is unsustainable. In addition, we do not expect household consumption will be able to offset sufficiently the falls in foreign trade and probably also in investment in the quarters to come.

Slovakia

According to the preliminary data, Slovak real GDP fell by a surprising 5.4% y/y in Q1 09. This is the first contraction in nearly ten years. Although no detailed data were published so far, we expect that both foreign and domestic demand contributed negatively to growth.

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Published on  Wed, Jun 10 2009, 11:03 GMT

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Central European Economic Outlook

Wed, Mar 25 2009, 10:29 GMT
by KBC Market Research Desk

KBC Bank

• Czech Republic

The Czech economy is in recession, a situation caused primarily by falling demand in Western Europe. The recession has been accompanied by very low inflation, which has created scope for interest rates to remain at low levels or even to be cut further.

• Hungary

If the global growth cycle bottoms out in the next 3-6 months, Hungary may also slowly recover later this year. So far, however, falling domestic consumption and investments should have a significant effect on import in the coming months, so the overall foreign trade balance is still expected to improve throughout the year.

• Poland

Although H1 2009 is still an official target for the Zloty’s entry into the ERM2 and is technically feasible, we have the impression that the government will opt out of ERM entry this year most likely quoting ‘un-favourable’ market conditions" as the reason.

• Slovakia

The Slovak economy grew by 6.4% in 2008 vs. 10.4% a year ago. Taking into account the latest downward revisions in the eurozone, we revised down our 2009 GDP forecast to -1.0%. The contribution of net exports will be negative on the back of lower foreign demand. The expected rise in unemployment rate together with the worsening consumer confidence will also affect the household consumption.

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Published on  Wed, Mar 25 2009, 10:29 GMT

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Central European Economic Outlook

Wed, Jan 21 2009, 09:26 GMT
by KBC Market Research Desk

KBC Bank

• Czech Republic

Deteriorating domestic macro-outlook and gloomy regional perspectives weigh down on the koruna. The Czech currency broke through key levels around 27.40 EUR/CZK and remains vulnerable to further short term losses. Nevertheless the CNB is not bothered by weak domestic currency as Czech foreign debt is very low and denominated mostly in the korunas.

• Hungary

After the IMF head gave a relatively positive assessment of the developments by saying that they are ‘rather satisfied’. The next milestone will be the Funds’ regular assessment in February, which could concentrate on the 4th quarter budget surplus target (already met), the bank rescue package (accepted by the Parliament) and the disinflation process.

• Poland

The Polish Zloty stays under pressure despite the fact that the pre-ERM negotiations with European partners which were scheduled to take place in H1 2009 are set to go on as planned.

• Slovakia

We have revised down our 2009 GDP forecast to 3.0% from 3.9% on the back of growth downturn our main trading partners. Drop in inflation will be connected with lower deregulations, cheaper food and fuel prices. Further monetary easing of ECB is expected.

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Published on  Wed, Jan 21 2009, 09:26 GMT

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Central European Economic Outlook

Thu, Dec 18 2008, 11:26 GMT
by KBC Market Research Desk

KBC Bank

• Czech Republic

The Czech economy slows down as the foreign demand freezes. Inflation falls due to cheap oil and food prices. Another rate cut is in the pipeline. Growing unemployment increases uncertainty and limits the consumer confidence and consumption. Cheaper oil will improve the trade balance rapidly.

• Hungary

MNB surprised markets twice as it reduced its base rate by double 50 bps cuts in just fourteen days. Nevertheless real yields are still very wide on the Hungarian market as inflation is expected to fall to between 2% and 3% over the next 12- months

• Poland

Polish macro outlook deteriorates as euro-zone falls into recession. We bet on significant slow down next year that should take place mainly due to lower export activity. Nevertheless the domestic consumption may be resilient as higher unemployment should be more than offset by fall in inflation and growth in real wages.

• Slovakia

The economy still grows at a strong pace, but the outlook has deteriorated on the back of worsening external environment. We revised down our 2009 GDP forecast to 3.9% from 5.5%. The NBS followed the ECB with a 75 bps cut bringing the key rate at 2.5%.

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Published on  Thu, Dec 18 2008, 11:26 GMT

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Central European Economic Outlook

Tue, Nov 4 2008, 11:37 GMT
by KBC Market Research Desk

KBC Bank

• Czech Republic

The Czech economy is starting to slow down significantly, and this trend will also persist in the months to come. Even so, after the significant slowdown later this year and in the first half of next year, towards the end 2009, we expect a moderate acceleration of economic growth. An extraordinary stimulus, which might offset some of the drop in output of existing enterprises, should be the launch of Hyundai’s new factory.

• Hungary

The IMF announced an €20bn rescue package for Hungary including €6.5bn support from the EU and €1bn from the World Bank in an effort to restore the confidence in the currency. The IMF package suggests that international institutions do not want Hungary to experience a fully market driven correction, but some kind of a managed recession.

• Poland

GDP growth estimates are in the process of being revised sharply to the downside as export perspectives have weakened dramatically along with the deterioration in economic sentiment in the EMU. Our baseline scenario still assumes a decent 3.5% y/y headline GDP growth in 2009, fuelled mainly by domestic consumption.

• Slovakia

The NBS cut rates at its October meeting. The base repo rate, as part of the coordinated effort with ECB’s move, went down by 50 bps to 3.75%. However, overnight rates were changed asymmetrically: while the refinancing rate was cut by 50 bps to 4.75%, the sterilisation rate was raised by 50 bps to 2.75%.

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Published on  Tue, Nov 4 2008, 11:37 GMT

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