Czech Republic
CNB Board members play with words
Hungary
The bond market is becoming less optimistic about the convergence outlook
Poland
Lower wage growth points to decelerating domestic demand
The Week Ahead
While the MNB delivers another 50bp rate cut, the NBP is expected to stay on hold
Overview
CEE labor markets divergence
The divergent developments in the labour markets of the various Central European economies thus far haven’t captured the attention. Nevertheless, significant differences among them do exist, and these may play an important role in the future monetary policy.
People in Central Europe generally lose jobs much faster than their western counterparts, notably Germany, where, owing to support for shortened working times, the unemployment rate went only slightly up, from 7.6% to 8.1%, notwithstanding the rapid economic downturn. The number of people registered with German labour offices has only increased by 7% since the start of the crisis. Central European economies, due to the lack of similar programmes and greater labour market flexibility, see much faster increases in unemployment.
The most striking developments are those in the Czech and Slovak Republics. In both economies, the number of people registered with labour offices has increased by almost 70% since the beginning of the crisis, and the unemployment rate has soared. In the similarly open Hungarian economy, which suffers of IMF prescribed austerity measures, unemployment had already been rising for some time before the crisis hit. Hence when the crisis emerged in full swing, the number of unemployed registered with labour offices went up by approximately 40%.
Poland again stands out when these economies are compared. Central European largest economy is more closed than the others and that works miracles. Not only the larger domestic market supported the Polish economy; the economy, in return, allowed for keeping more jobs and for encouraging consumption (positive multiplication). Thus the number of unemployed in Poland has increased by just a quarter since the start of the crisis.
In addition, the full launch of the construction preparations for the European Football Championship (2012) and faster economic growth should begin to change the labour market situation in Poland for the better at a faster rate than in Poland’s neighbours. This is the key reason why a monetary tightening should be expected sooner in Poland than in other countries.
