This week, another four CEE countries will publish their flash estimates of GDP growth for 1Q16. We expect deceleration of y/y growth in Poland, Hungary and Slovakia, while growth should accelerate further in Romania (to 4.3%), supported by booming household consumption.
Trade balance, inflation and industrial production data will also be published in CEE region. Industrial output data will be more interesting to watch, as this could deliver more details about decelerating industrial output in Hungary.
Trade balance, inflation and industrial production data will also be published for several CEE countries, with only minor changes in inflation rates. Industrial output data will be more interesting to watch, as this could deliver more details about decelerating industrial output in Hungary. The Hungarian central bank will hold a non-voting meeting on interest rates on Tuesday which could shed more light on the continuation of the self-financing program, especially the MNB’s swap facility. This week, the MNB and CNB will also publish the minutes from their last MPC meetings. The latter will be more interesting to read, as Governor Singer hinted that the possibility of a change in the intervention floor (in the event of stronger deflationary pressure) was discussed at the last meeting. On Friday, Moody’s will decide on Polish rating – downgrade is a high probability event that seems to be priced in to a great extent.
After a long period of fiscal consolidation, it seems that we will see a partial setback. Fiscal deficits in 2015 surprised on the positive side in all CEE countries except for Slovakia. The deficits in Croatia and Serbia came close to 3% of GDP, while the deficit dropped below 1% of GDP in the Czech Republic and Romania, both in nominal and structural terms. Unfortunately, many CEE countries are not going to cement their achievements and save their (laboriously rebuilt) fiscal space for a rainy day. The Hungarian, Polish and Romanian governments are either planning outright fiscal easing or cyclically higher tax revenues will be used to finance new government initiatives rather than be used for deficit reduction. The structural deficit will thus deteriorate in all of these countries. Although we do not think that some CEE countries will re-enter EDP procedures in the near future, Poland, Romania and Slovakia might come under pressure later this year to take some corrective measures in order to put their deficits back on track or avoid the EDP.
More : CEE Insights , 9 May 2016