Czech Republic
GDP suggests the worst might be over for the Czech economy
Hungary
Lower inflation could make the budget target hard to achieve
Poland
Inflation on the way back to NBP comfort-zone
The Week Ahead
Polish industrial output in focus
Overview
The Czech and Hungarian GDPs Are Like Night and Day
The Central European economies (with the exception of Poland), like most other EU countries, presented their key inflation and growth data last week. Probably the most interesting of the indicators released were the growth data of the Czech Republic and Hungary, albeit we haven’t yet the detailed structure of their GDPs.
Nevertheless, the Czech Republic’s growth clearly sprang a pleasant surprise in two respects. Firstly, quarter-on-quarter growth in Q3 was higher than most expected. Secondly, the Statistical Office also revised the Q2 growth into slightly positive territory, and this actually means that the Czech economy already reached the bottom of its economic cycle in the spring.
Unlike the Czech Republic’s growth, Hungary’s growth sharply disappointed showing another contraction. The Hungarian economy dropped by more than 7% on the yearon- year basis, but it fell again significantly on the quarter-on-quarter basis (by 1.8%), unlike numerous EU economies. Concluding, the Hungarian economy hasn’t hit bottom yet.
Thus the Czech and Hungarian economies are developing largely differently, although their respective structures are fairly similar. What differentiates these economies is obviously the extent of fiscal restriction, which is much stronger in Hungary and, in addition, augmented by the forced expenditure cuts made by indebted households. Thus the only shared light at the end of the tunnel for both economies are exports, which fared well in the third quarter of the year. The current positive signs from the German economy are signalling that the Czech and Hungarian export-oriented industries might also perform well in the final quarter of this year.
