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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, 11:07 GMT