News
BG: Mixed – 3Q GDP growth slows to 1.3% yoy / C/A surplus widens to 3.9% of GDP (p2)
LV: Positive – Govt. approved additional set of fiscal consolidation measures worth LVL 29.1mn to fulfil IMF requirements (p3)
RO: Positive – 3Q GDP grew 4.4% yoy (p3)
SK: Positive – 3Q GDP grew by 2.9% yoy (p3)
TK: Neutral – Sep CAD at USD 6.8bn matched the market expectation (p4)
Today’s Events
BG: Oct Unemployment / CZ: CZK 7bn 2021 CZGB auction / HU: Buy back auction (2012/B and /C), MPC minutes / PL: PLN 1-3.5bn 2016 POLGB auction / RU: RUB 10bn 10Y OFZ auction, Oct IP
EEMEA Markets
Preliminary GDP releases for the CEE region for 3Q suggested that gains in economic activity remained robust. From data released over Monday and Tuesday, there are some country-specific factors at play. At this stage we do not have a detailed breakdown but in Hungary, Romania and Russia agriculture has a role to play as last year’s poor harvest turns into a bumper 2012 harvest. It seems very unlikely that 4Q will be able to maintain this performance but that said these sort of readings mean that, at this stage, the risk to our full-year growth forecast for the region of 4.1% for 2011 is firmly to the upside.
Moving country by country, Russia yesterday posted GDP growth of 4.8% yoy. In qoq terms Russia posted gains in excess of 1.5%, making up for a lackluster 0.2% gain in 2Q. Even a flat qoq GDP reading for 4Q would mean an upward revision to our full-year GDP forecast of 4.0% for this year. A flat qoq reading for 4Q would also translate into positive carryover for next year of 1.0pp, almost half the 1.8pp carryover this year but still supportive of full year growth.
Romania’s 3Q reading was even more impressive, rising 1.9% qoq (4.4% yoy), up from 0.2% qoq in 2Q. As well as agriculture, a decline in inflation will have helped the consumer while monthly IP readings have held up well. Our full-year GDP forecast of 1.8% assumed average qoq growth in 3Q and 4Q of 0.5%, leaving clear upside risk to this forecast. Assuming a flat 4Q, the positive carryover into 2012 stands at 1.0pp (0.2pp this year).
Hungary was also an outperformer, posting gains of 0.5% qoq (1.4% yoy) while 2Q was revised upwards by 0.2pp to 0.2% qoq. In terms of output, Hungary suffered the most from agriculture last year, allowing for a greater payback this year. September’s bumper industrial production reading of 3.9% mom SA (transport related) will also have helped. Our forecast of 1.5% growth for this year allows for a modest contraction in 4Q. Assuming a flat 4Q, Hungary will benefit from a positive 0.3pp of carryover next year, down from 0.6pp entering this year.
Czech was weaker (see also p. 2), posting a flat quarter in 3Q (1.4% yoy) after gains of just 0.1pp in Q2 as we layer weaker IP performance on top of already lacklustre domestic demand. That said, our full year forecast of 2% has already assumed a pretty flat 2H. Bulgaria fell into the same camp, with GDP flat qoq (1.3% yoy). This follows a weakish 0.3% qoq gain in 2Q. Despite a high degree of openness Slovakia performed well, posting gains of 0.7% qoq (2.9% yoy).
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Gillian Edgeworth
UniCredit Research