Czech Republic
GDP declines sharply at the beginning of 2009
Hungary
Mounting inflation risks
Poland
Inflation on the rise due to food and energy
The Week Ahead
Polish retail sales and industrial production should confirm deteriorating macro-conditions
Overview
CEE growth outlook remains gloomy
Export-oriented Central European economies are in recession. This is evident from the preliminary Q1 data published across the region. The main economy of the region –Poland – has not yet unveiled its Q1 GDP data, but, as its year-on-year growth will be zero at best, the result for the entire Central European region as a whole will be gloomy indeed, i.e., the worst ever.
Although the detailed structure of the GDP data from the Czech Republic, Hungary, and Slovakia is not available yet – it is not difficult to find the main reasons for the economic downturn. Regarding supply, it is of course the industrial sector; and the retail sector, which did not fare well either, who contributed to the decline in growth. Regarding demand, we expect the detailed data to show a huge investment fall, poor consumption, and mixed net export figures, stemming from extremely poor demand abroad.
Of course, the question is whether the following quarters will show a similar poor performance from the Central European economies, or whether the hypothesis of the second derivative turning positive also applies here. In that case, the economy will continue to go down, but it will do so more slowly. We believe that this second hypothesis will materialise at least in the second quarter, when the Central European car-oriented industry must benefit from the bonus for scrapping old cars, introduced in western countries (the only Central European country to have introduced this bonus is Slovakia). Nevertheless, the question is how Central European industry will perform after the effect of the bonus for scrapping cars dies down…
