* Czech, Romanian GDP miss forecasts, Poland slows
* Stronger readings in Slovakia, Hungary and Bulgaria
* Slowdown seen ahead as sluggish euro zone, sanctions bite
By Jason Hovet
PRAGUE, Aug 14 Growth was weaker in much of the
EU's emerging east in the second quarter, auguring a broad
slowdown for the rest of the year as western Europe struggles
and the whole region starts to feel the impact of the Ukraine
The Polish economy slowed in the quarter while the Czech
Republic stagnated and Romania actually contracted 1 percent,
surprising analysts and raising chances that the central bank
will cut interest rates further in the Balkan country.
There were bright spots, with preliminary gross domestic
product (GDP) readings in Slovakia, Bulgaria and Hungary all
better than expected, led by the latter's 0.8 percent
But while analysts see the recovery as on track longer-term,
few expect the pace of growth to stay as strong in the second
half of the year because of economies to the west - namely
Germany - weakening, and rumblings to the east with tit-for-tat
sanctions between the European Union and Russia over Ukraine.
"The bigger factor will be what happens to the west of these
countries not to the east," Capital Economics economist William
Jackson said, referring to data showing Germany's economy shrank
in the second quarter and France's showed no growth.
"The second half is going to be more challenging for the
region. We might see growth weaker but as long as we don't see a
continued slowdown in Germany, it is not likely that the
region's recovery is going to go into reverse," he said.
The Czech economy stagnated on a quarterly basis, missing
forecasts for a 0.2 percent rise and after expanding by 0.8
percent at the start of the year. On a year-on-year basis, GDP
grew 2.6 percent in real terms.
The Czech economy exited a record 18-month recession last
year and the central bank helped the recovery in November by
intervening to weaken the crown to fight deflation risks. The
weaker currency has boosted exporters and helped spur a revival
in consumer demand.
"The positive fact is that leading indicators suggest the
expansion of the Czech economy should continue in the coming
months," Raiffeisenbank's chief analyst Michal Brozka said.
"However, an important inconvenience... is Europe's poor
performance this year, even in the first half when the Ukraine
crisis was weaker than today."
In Poland, the region's biggest economy with strong trade
links to Russia, a flash estimate from the state statistics
office showed growth in quarterly terms nearly halved to 0.6
percent in the second quarter from 1.1 percent in the first
three months of the year.
GDP slowed to 3.2 percent year-on-year growth, down from 3.4
percent in the previous quarter.
RATE CUTS AGAIN?
Poland has some of the highest interest rates in Europe with
a base rate of 2.5 percent and some analysts said the data
together with a bleaker outlook and the fact that consumer
prices fell on an annual basis in July - the first time in
decades - meant rate cuts may start again.
"The GDP numbers (...) point to a slowing growth momentum in
the Polish economy during the spring," BNP Paribas economist
Michal Dybula said.
"Coupled with the negative CPI print in July they support
the resumption of interest rate cuts over the coming months,
especially as the growth and inflation outlook are getting worse
on Russia sanctions."
Price growth across central Europe has remain subdued
despite an economic revival, and Russian sanctions against EU
food imports may add downward price pressure as food normally
exported floods markets.
The Romanian central bank is likely to look at cutting its
key interest rate again in September given the latest data,
analysts said after Romania showed a surprise quarterly
contraction while year-on-year growth slowed sharply to 1.2
percent from 3.9 percent in the first quarter.
"While the final data will probably show an upward revision,
this is a very weak number by all accounts," UniCredit Bank
economist Dan Bucsa said.
"On the demand side, investment continues to drag on growth,
since the state is spending almost nothing on infrastructure and
co-financing of EU funds. We expect the NBR to cut twice more to
(Additional reporting by Robert Muller in Prague, Radu Marinas
in Bucharest, Tsvetelia Tsolova in Sofia, Sandor Peto in
Budapest and Marcin Goettig in Warsaw; Editing by Louise