CEE Growth Surprises In Q3

Although a detailed breakdown of Q313 real GDP data is not yet available, recently released flash estimates suggest the CEE economic recovery is gathering steam, with the notable exception of the Czech Republic. Real GDP growth beat consensus estimates in Hungary, Romania and Poland ( see chart below), supporting our view that the region will undergo a broadly export-led economic recovery over the coming quarters, before eventually translating into improved domestic demand.

Hungarian Q313 real GDP came in much higher than consensus estimates at 1.7% y-o-y, up from 0.5% in Q213, driven by stronger exports to non-EU states, as well as a boom in the construction and automotives sectors. With fiscal policy likely to remain expansionary in the run up to the Spring 2014 general election and leading indicators showing a notable improvement, we have revised up our 2013 real GDP growth forecast from 0.3% to 0.8%, and hold to our above-consensus forecast of 1.7% growth in 2014.

In Romania, Q313 real GDP came in at 4.1% y-o-y in Q313, from 1.5% the previous quarter, supporting our above our above-consensus outlook for economic growth in the country in 2013 and beyond ( see 'Above Consensus Growth in 2014', September 5). Although the data release poses slight upside risks to our forecast of 2.4% growth over the course of 2013 (against consensus estimates of 2.0%), we withhold from adjusting our forecasts until a more detailed breakdown of Q3 data becomes available.

Growth Surprises To The Upside, But Czech Economy Falters
Europe - Q313 Real GDP % Chg y-o-y

Although a detailed breakdown of Q313 real GDP data is not yet available, recently released flash estimates suggest the CEE economic recovery is gathering steam, with the notable exception of the Czech Republic. Real GDP growth beat consensus estimates in Hungary, Romania and Poland ( see chart below), supporting our view that the region will undergo a broadly export-led economic recovery over the coming quarters, before eventually translating into improved domestic demand.

Growth Surprises To The Upside, But Czech Economy Falters
Europe - Q313 Real GDP % Chg y-o-y

Hungarian Q313 real GDP came in much higher than consensus estimates at 1.7% y-o-y, up from 0.5% in Q213, driven by stronger exports to non-EU states, as well as a boom in the construction and automotives sectors. With fiscal policy likely to remain expansionary in the run up to the Spring 2014 general election and leading indicators showing a notable improvement, we have revised up our 2013 real GDP growth forecast from 0.3% to 0.8%, and hold to our above-consensus forecast of 1.7% growth in 2014.

In Romania, Q313 real GDP came in at 4.1% y-o-y in Q313, from 1.5% the previous quarter, supporting our above our above-consensus outlook for economic growth in the country in 2013 and beyond ( see 'Above Consensus Growth in 2014', September 5). Although the data release poses slight upside risks to our forecast of 2.4% growth over the course of 2013 (against consensus estimates of 2.0%), we withhold from adjusting our forecasts until a more detailed breakdown of Q3 data becomes available.

Slowly Gathering Momentum
CEE - Real GDP, % Chg y-o-y

Growth came in at 1.9% y-o-y in Poland, beating expectations of 1.6%, with household expenditure and net exports likely to have been the main driver of the better-than-expected readings. We would need to see a growth reading of around 1.7% in Q413 to reach our 1.2% end-2013 forecast, and would be tempted to revise-up our forecast of 2.3% growth in 2014 if leading indicators continue to improve over the coming months.

However, the readings were not exclusively positive: Czech Q313 numbers arrived at -1.6% y-o-y, missing consensus estimates by over a percentage point. Although an improvement from the Q113 contraction of 3.0%, the readings put pressure on our view that an export-led recovery is underway in H213, and we have chosen to revise-down our forecast for real GDP to shrink by 1.2% in 2013, from a 0.5% contraction previously.

Read the full article

This article is tagged to:
Sector: Country Risk
×

Enter your details to read the full article

By submitting this form you are acknowledging that you have read and understood our Privacy Policy.