Central European Economic Outlook
Thu, Aug 6 2009, 09:36 GMT
by KBC Market Research Desk
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.
