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The impact of euro zone slowdown on CEE exports
Fri, Aug 1 2008, 13:43 GMT
by Danske Research Team
The Visegrad countries Poland, Hungary, Czech Republic and Slovakia have experienced strong growth in exports in recent years. This has mainly been due to high demand growth from the euro zone led by Germany their largest export market. However, looking ahead two factors are likely to have a negative impact on exports for these countries.
First, over the next year the current slowdown in the EU will have a negative impact on the exports in the Visegrad countries. The latest numbers on euro zone PMI show a further decline, which indicates that demand is slowing and thereby slowing export growth in Visegrad (cf upper left graph).
Second, the currencies in Poland, Hungary and the Czech Republic have continuously strengthened against the euro since the beginning of the year. In the short run this also affects exports negatively. As long as the currencies stay at record levels, this will contribute to a further decline in export growth.
Junes preliminary trade balance numbers are scheduled to be published for Hungary on Friday next week. The Hungarian trade balance have been characterised by large deficits for the past decade. However, in 2006 the Hungarian government tightened fiscal policy significantly in a move to curb the large imbalances in the economy. It succeeded and the trade balance went into surplus in Q1 08 helped by a sharp slowdown in domestic demand. We expect the trade balance surplus to have grown to EUR101.2m in June. However, this is partly due to some seasonal effects. Going forward the outlook for Hungarian exports is not too positive with the economic slowdown in the euro zone in mind.
Published on Fri, Aug 1 2008, 13:47 GMT
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