Czechia and Hungary suffer from unbalanced recovery
|On the radar
-
In Slovenia, industrial production grew marginally by 0.3% y/y in July.
-
In Croatia, tourism arrivals declined by -2.0% y/y in July.
-
In Romania, August’s inflation eased to 5.1% y/y.
-
In the afternoon, the Hungarian central bank will publish minutes from the last rate setting meeting.
Economic developments
In most of the CEE countries, the post-pandemic recovery has been balanced, i.e. both consumption and investment grew compared to 4Q19. Czechia and Hungary are the two exceptions, however. In Czechia, private consumption is roughly 5% lower compared to the pre-pandemic level, as Czechia experienced the biggest loss of purchasing power over the last couple of years. In other words, since 2019, cumulative growth of compensation was much lower compared to the inflation change in Czechia. In Hungary, on the other hand, investment growth lagged behind (what we also touched upon in Tuesday’s CEE Daily), roughly 15% lower compared to 4Q19. In other CEE countries, both consumption and investment growth were positive. Slovakia posted the lowest dynamics of both, while Romania leads. Croatia also posted very dynamic growth of consumption (higher than Romania).
Market developments
The Hungarian central bank will publish minutes from the last rate setting meeting. In August, the key interest rate was kept stable. The August’s inflation eased however 3.4% that should support further monetary easing. We expect key policy rate to be lowered to 6.25% at the end of the year (that is another 50 basis points). In Czechia, the central banker Zamrazilova said she sees no reason to stop monetary easing, but the Board needs to remain cautious and avoid bigger moves. On the bond market we see yields moving south ahead of the ECB meeting (and the FOMC meeting scheduled for September 18th). On the FX market, the Polish zloty has been slightly stronger against the euro this week, while the Czech koruna and the Hungarian forint on the contrary.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.