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Central European Weekly

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The NBS Cuts Base Rate by 50 bps to 3.25%

Mon, Nov 17 2008, 12:46 GMT
by KBC Market Research Desk

KBC Bank


Czech Republic

The Czech Economy Did Not Slow in the Third Quarter


Hungary

Currency weakness may play havoc with inflation outlook


Poland

Inflation scare off the agenda, growth considerations take firmly centre stage...


Slovakia

The NBS Cuts Base Rate by 50 bps to 3.25%


The Week Ahead

Overview

Inflation picture improves rapidly in Central Europe

Over the past week, Central European markets were confronted with important macroeconomic figures that provided a more precise picture of how the region is doing in economic terms.

The first in line was the inflation data for October, which confirmed what many analysts had already expected – inflationary pressures in Central Europe are quickly receding. Similar factors to those in the mature economies are contributing to the favourable inflationary developments in the region – namely the lower prices of oil, i.e., petrol, the stagnating prices of food, and also a fall in some items (e.g., automobiles), which all reflect slowing domestic demand. It is important to add that over the coming months the situation in terms of inflation should continue to improve throughout the Central European region.

While Central Europe is in general homogenous, in terms of inflation developments, the situation is quite different for economic growth. Preliminary figures for GDP growth in the third quarter show that there is currently a huge gap between, on the one hand, the Czech Republic and Slovakia, and on the other, Hungary. While the economies of the former Czecho-slovakian federation continue to enjoy high growth rates that appear to be completely ignoring the growth slowdown in Western Europe, it would seem that Hungary has already gone into a recession that, next year, due to the credit crunch, could show itself to be far harder than the government in Budapest and its IMF creditor counted on.

Published on  Mon, Nov 17 2008, 12:50 GMT


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Legal disclaimer and risk disclosure

This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.

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