Czech Republic
The CNB cuts repo rate to an all-time low
Hungary
Foreign trade balance posted a record surplus, C/A shrinks significantly
Poland
EUR/PLN enjoys global equity rally
The Week Ahead
GDP growth in the Czech Republic and Hungary will be deeply in red
Overview
CE exports see green shoots thanks to scrap subsidy
Probably the best macroeconomic evidence that the spring signs of the stabilisation of the global economy have also reached Central Europe is the Czech and Hungarian trade balance data for March as both countries saw their best trade balance surpluses ever.
The excellent Czech and Hungarian foreign trade results were due to a combination of multiple factors. One of it, the rapid slowdown of the year-on-year fall in exports, is absolutely consistent with a hypothesis that is often cited in financial markets today and is based on the opinion that the rapid economic downturn has slowed down dramatically, or even stopped. Unfortunately for export-oriented economies such as those of the Czech Republic and Hungary, the risk lies in the fact that the fairly good export figures were only achieved due to one-off measures in neighbouring countries – notably the introduction of what is known as the bonus for scrapping old cars in Germany. Hence there is serious concern that the Czech and Hungarian export figures will again deteriorate when the positive effect stemming from the scrap subsidy for cars starts to run out of steam.
Another warning comes from imports, which are perhaps an even more important component in achieving the great trade balance figures. Imports into both the Czech Republic and Hungary continue to fall rapidly, and this means only one thing: domestic demand remains very low, confirming our opinion that both countries will experience recession this year, notwithstanding the German, Austrian or Slovak bonuses for scrapping cars.
