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Central European Weekly

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Poland remains the only country of the region showing positive growth

Wed, Jun 3 2009, 04:49 GMT
by KBC Market Research Desk

KBC Bank


Czech Republic

Czech industry continued to plummet in April


Hungary

NBH stays on hold


Poland

Poland remains the only country of the region showing positive growth


Overview

CNB and NBP have not left easing mode

While markets of risky assets are still being fuelled by the hypothesis of the spring signs of recovery, the central banks of the Czech Republic and Poland are concerned with something else. They seem to be primarily setting the stage for being able to cut official interest rates again, thus relieving the economy.

Unlike the United States, and particularly certain Asian countries, where signs of a stabilisation of the economic downturn are already evident, nothing like that is true for the Czech Republic and Poland at the moment. This was confirmed by both the flash forecast of April’s industrial output in the Czech Republic and Poland’s GDP forecast for the first quarter of this year. Both values are in line with the moderate statements by Members of the CNB Board and the NBP, who particularly highlight the poor performance of their economies.

Thus, given the fact that, with the current levels of the koruna and the zloty, neither the CNB nor the NBP need to be concerned about a weak local currency and the possible upside inflationary consequences, additional cuts in the official interest rates in the Czech Republic and Poland appear to be highly probable. And when are those rates going to be cut? Both central banks are likely to cut their rates by another 25 basis points as early as in June. For the CNB, this was indicated by the series of dovish comments from Members of the CNB Board. For the NBP, this will depend on when the bank discusses the new inflation forecast, which will include a new, probably more pessimistic, outlook for the Polish economy.


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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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