Page 12 - bne_newspaper_August_17_2018

Central Europe
August 17, 2018 www.intellinews.com I Page 12
Industrial production down
Falling demand and labour problems are threat- ening industrial production growth, which has already started to fade in some countries of the region, but the boom years have created mo- mentum, and individual industries are holding up industrial expansion in several countries in the region for the meantime.
Poland has bucked the trend, delivering a positive surprise in July after posting an unadjusted 6.8% y/y growth in industrial production for June. The headline figure beat consensus, which expected growth to come in at only slightly above the 6% mark. The acceleration of growth in June – after expansion of 5.4% y/y in May – once again owes to calendar effects, but also to the unexpectedly good performance in the energy sector, analysts say.
Czech industrial production also posted a 3.4% expansion at constant prices in June, following 1.4% growth in May. The main drivers were the energy and engineering sectors, the CSU said on August 6. But some analysts are warning that Czech industrial production growth is capped by insufficient capacity and labour to expand further.
Romania’s industrial production index increased by only 1.2% y/y in May and the average growth rate calculated for the rolling three months
eased to 2.1% y/y — the weakest performance since September 2016. Romania’s industry shows signs of fatigue after it expanded by 7.8% y/y in 2017, which was the best performance in the post-crisis decade.
Time to step up the value added ladder
A lack of investments in key industries is the lim- iting factor in most of the economies in the region. A lot of investment has gone into all the countries of the region, but most of it was targeting basic infrastructure that the previous socialist gov- ernments failed to build, and then building light manufacturing facilities that provided work for the first post-socialist generation.
Now the game has changed an entirely differ- ent wave of investment needs to start to take the economies of the region up to the next step on the value added ladder to build more sophisticat- ed industries and develop new technologies.
In a country like Romania, which is further behind than its Central European peers, the challenge
is easier as it still has a lot of growth available in areas like the food processing industry.
At the same time poor structural reforms will limit growth, and here backtracking on liberal reforms in countries like Poland and Hungary will turn into problems in the future.
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