The numbers are in and they’re not pretty.
Growth in central Europe is only at a sluggish 0.8 per cent – lower than any time since the depths of the economic crisis in 2009.
The Czech Republic saw a fourth quarter contraction of 1.7 per cent (which comes to a 0.2 per cent quarter-on-quarter contraction), and an annual recession in 2012 of 1.1 per cent. That means the country has now been in a recession for four straight quarters.
“While there was no full breakdown available, we do know from the statistics office that consumption and investments were a particular drag on growth, though manufacturing actually performed much better than in previous quarters – signalling some green shoots on the horizon perhaps driven by a turnaround in sentiment on the eurozone,” wrote Peter Attard Montalto of Nomura.
The growth was bad enough to restart speculation that the central bank’s Monetary Policy Council could start intervening in foreign exchange markets to weaken the koruna as a way of reviving exports.
Hungary has stayed mired in recession – it closed the year with a 1.7 per cent contraction.
Maja Goettig of KBC Securities wrote:
Hungary’s recession deepened further, worse than expected, now stretching to four subsequent quarters of contraction. The Czech GDP also shrank for the fourth consecutive quarter, however, the drop was smaller than forecasted and the recession eased slightly compared to 3Q12. Both Hungary and Czech economies are negatively affected by the weak domestic demand amid austerity measures undertaken by their governments aimed at lowering budget deficits to below 3% GDP in 2013. As both countries are export-oriented economies, with their performance highly correlated with that of the euro area, they also suffer from the bloc’s deepening recession.
Slovakia, which had been one of the region’s stronger economies, continued to show signs of a slowdown, with fourth quarter growth at an annualised 0.7 per cent an growth for the year at 2.1 per cent.
“The downside risks of our forecast at 1 per cent year-on-year posed by the development of industrial production in the recent months have materialised. Slowdown in 4Q GDP confirms our outlook for 2013, as the slowdown from late 2012 is likely to persist also in early 2013,” noted Erste Bank.
Romania performed slightly better than expected, emerging from recession with an annual 0.3 per cent growth for the final quarter.
Neil Shearing of Capital Economics said that the data: “follow the release of preliminary estimates of 2012 GDP from Russia and Poland over the past couple of weeks. Neither country has published Q4 data, but we can use the annual data to proxy growth in the final quarter of the year. On this basis, it seems that GDP growth in emerging Europe slowed to just 0.8 per cent year-on-year in Q4 – its slowest pace since the end of 2009.”
Looks like the region will have to hang on and wait for a revival in Germany and the broader eurozone, which would lead to a pickup in exports.
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