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The Regions This Week
May 12, 2017 www.intellinews.com I Page 5
Central Europe
The Latvian government approved guidelines for reform of the tax system. Key reforms assume the introduction of a higher personal income tax band of 23% for income of over €45,000. Corpo- rates would 20% on distributed profit, but the plan would cut tax on reinvested profit entirely. Overall tax revenue would rise from 29% to 32% of GDP.
The Latvian economy is now set to expand the fastest among the Baltic states in both 2017 and 2018, the European Commission predicts in its spring economic forecast. Latvia is likely to register growth of 3.2% this year – an upwards revision of 0.4pp compared to the winter fore- cast. The outlook for Lithuania has not changed and remains at 2.9%. Estonia’s GDP is expected to expand 2.3% this year, a slight upwards revi- sion of 0.1pp.
Estonia, Latvia, and Lithuania hope to fully link their Soviet-era power grids with the EU net- work through Poland, the leaders of the three countries said after meeting the Polish prime minister on May 8. While Estonia and Lithuania have power connections with EU neighbours, they are not enough yet to ensure full integration.
A clutch of macroeconomic announcements demonstrated the strength of the Czech econ- omy. Seasonally adjusted industrial production rose 4.4% in March, while seasonally adjusted retail sales expanded 7%, and there was another huge trade surplus of CZK22.6bn. Unemployment fell a further 0.4pp in monthly terms to 4.4% in April. However, inflation surprised as it retreated to 2% y/y in April, a full 0.6pp slower than in March.
CEZ recorded a 13% y/y drop in net profit to CZK8.7bn (€327mn) in the first quarter of 2017, above market expectations. That triggered a rise in guidance from the power utility, with full-year
net profit now forecast at the top of the previous CZK12bn-17bn range.
The Slovak government approved investment incentives for a €100mn investment by French carmaker PSA Peugeot Citroen to expand pro- duction at its Trnava plant. Peugeot will launch production of a new model in 2019 to replace the current compact Peugeot 208. The company has pledged to create 420 new jobs by the end of 2018.
The Slovak trade surplus ballooned to €377mn in March, compared with the €152mn excess in February.
The Polish banking sector posted net profit of just over PLN2.8bn (€660mn) in the first quar- ter, representing a drop of 11.1% on the year. State-controlled Bank Pekao reported net profit of PLN350mn (€82.9mn) in the first quarter, a fall of 49% y/y in earnings.
Polish wages grew 4.1% y/y in the first quarter,
resulting in an average gross monthly pay packet of PLN4,353.5 (€1,030.4). Unemployment fell 1.7pp y/y to 7.7% in April, the labour ministry an- nounced.
Hungarian lender OTP Bank's net profit beat market expectations as it rose to HUF52.8bn (€170mn) in the first quarter of 2017.
Hungarian telecom Magyar Telekom reported an Ebitda decline of 16.5% in the first quarter to HUF38.3bn (€102.8mn), while after-tax profit fell 54.6% to HUF4.8bn.
Hungary’s trade surplus fell €1.5mn in annual terms in March to €956mn, while in April, infla- tion fell to 2.2% y/y in April, slightly below market expectations.