Are you sure?

Hungary, Czech data signal worst may be over for CEE

  Output in Hungary fell less than expected in March while both the Hungarian and Czech trade accounts posted big surpluses which analysts said were the first signs of improvement in the region’s export-led economies.

Industrial output has been falling steeply for months in central Europe’s heavily export-reliant economies as the global economic crisis hit their key markets in western Europe, primarily in Germany.

But data on Thursday showed Hungary’s output fell by an annual 15.6% in March based on unadjusted data after plunging 28.9% in February, and at a much lower pace than analysts’ median forecast for a fall of 21.5% in a Reuters poll.

At the same time, Hungary’s trade account posted a surplus of €492.8 million in March based on preliminary data compared with a forecast of a €285 million surplus.

The Czech foreign trade balance also had a record surplus of CZK 23.4 billion ($1.17 billion) in March, more than triple analyst forecasts in a Reuters poll.

Analysts said the data were encouraging in the sense that economies had likely hit the bottom in the Q1 of the year, but a plunge in imports indicates domestic demand is shrinking fast.

“The two sets of data (Hungarian output and trade) underline that the economy has likely reached a bottom around Feb-March and these are the first real economy data showing some improvement,” said Gyula Tóth, analyst at Unicredit.

The economic data, along with a benign global sentiment, helped lift both the forint and the Czech koruna, with the forint hitting four-month highs of around 278.50 versus the euro.


Analysts said Czech exports appeared to have been lifted by a car scrap subsidy, in which the governments in countries like Germany are giving cash handouts to consumers to turn in their old cars and buy new ones. The economic crisis has also depressed imports because consumers are buying fewer foreign-made goods in the region.

In Hungary, weak export demand caused an 18.2% annual fall in exports in euro terms. However, imports fell even more sharply, by 23.4% year-on-year, and analysts said the government’s deep spending cuts could dampen demand further.

The government expects the Hungarian economy to contract by up to 6% due to a fall in exports and consumption.

Analysts said the trade data were unlikely to have an impact on the Czech rate decision later in the day. The bank is expected to cut rates by 25 basis points.

“It’s not going to have an impact on today’s central bank decision. They are unlikely to interpret this one number as a recovery, as they will see the improvement is mainly due to the scrap subsidy,” said Martin Lobotka, an economist at Ceska Sporitelna. (Reuters)