* Hungarian GDP shrinks 2.7 pct y/y in Oct-Dec, more than
* Czech GDP down 1.7 pct y/y, in line with estimates
* Romania, Bulgaria, Slovakia avoid contraction
* Analysts say more monetary easing to come
By Michael Winfrey
PRAGUE, Feb 14 Weak exports and poor demand in
home markets pushed the Czech and Hungarian economies deeper
into recession at the end of 2012 with little sign yet of a
return to growth.
Government tax hikes and other policies in both states have
made consumers reluctant to spend and driven firms to sack
workers and halt investment, exacerbating the painful effect of
the euro zone debt crisis on the European Union's eastern flank.
In a region whose economies are underpinned by factories
pumping out cars and electronics, the debt crisis in the euro
zone and government efforts to cut deficits has wiped out the
main driver of growth, even if exports - at least for the Czechs
- are still growing slightly.
While governments in both countries have sought to shrink
public debt, their central banks have eased policy to combat
rising unemployment, with Hungary's cutting rates six times in a
Rate setters in Prague have slashed the official cost of
borrowing to almost zero and have floated the idea of knocking
the crown currency weaker, but the moves have done little to
drag them out of recession.
Hungary's economy contracted for the fourth straight
quarter, by 2.7 percent on the year from October to December on
a 20 percent drop in agriculture and a fall in industrial
"This is shocking," said Zoltan Torok, an analyst at
Raiffeisen Bank in Budapest. "In a nutshell, every segment of
the economy is struggling. It was evident before that without
net exports the contraction would be as low as 4 or 5 percent."
For the Czech Republic, whose sixth straight quarter of
decline or stagnation marks the worst recession in 15 years, the
fall was 1.7 percent on the year from October to December.
It was in line with forecasts but worse than the central
bank's outlook for a 1.4 percent fall.
But Romania, the beneficiary of an International Monetary
Fund-led bailout, continued a slow recovery from a deep two-year
Its economy grew 0.3 percent on an annual basis, slightly
above market expectations. Neighbouring Bulgaria grew 0.5
percent on an annual basis.
Euro zone member Slovakia, too, grew 0.2 percent, beating
expectations for a drop. But ratings agency Moody's said slowing
growth that threatened Slovakia's worsening budget revenue
outlook was credit negative. Both Moody's and its competitor
Standard & Poor's have cited Hungary's loan growth as a reason
they have kept negative outlooks for that country.
Poland, the region's biggest economy, will release its
fourth quarter GDP data on March 1. Some analysts fear it too
could contract at the start of this year.
Hungarian Prime Minister Viktor Orban's government tried to
put a positive spin on Thursday's data, citing an unexpected
jump in manufacturing data and improving consumer confidence
last month, and saying it was fighting debt.
"Growth can return this year at a time when state finances
are in order, state debt is in a continuous decline and
employment is expanding," the economy ministry said.
But the figures are real trouble for Orban, who has embarked
on an independent policy course, saying it was vital for
Hungary's growth to maintain a free hand from the IMF and other
With Germany - the main destination for the region's exports
- contracting more than expected, analysts say Budapest's own
forecast of 0.9 percent for this year now looks optimistic. An
election is due early in 2014.
"Our forecast for a 0.2 percent contraction of
(Hungarian)GDP in 2013 and 1.0 percent growth in 2014 remains
intact," said Zsolt Kondrat, head of research at MKB Bank in
Each time an emerging EU economy contracts, it misses a
chance to catch up with richer western states in terms of living
standards and negates one of the main reasons the mostly
ex-Communist countries joined the bloc.
In order to "converge" - Bulgaria's living standards are
about 45 percent of the EU average, the Czechs' are 80 percent -
they have to outpace more developed states, but for the time
being, they are largely holding even.
Czech Prime Minister Petr Necas's government expects growth
to resume after two years of decline in the second half of this
year, but it cut its forecast last month to almost zero, and the
central bank now predicts another full year of contraction.
Although the bank has eased its threat to weaken the crown
against the euro, analysts said Thursday's data would add to
arguments for the bank to act.
"This GDP figure is evidence of an ongoing recession and
maybe some fiscal and/or monetary stimulus is likely to come,"
said David Marek, chief economist at Prague's Patria Finance.