Page 36 - BNE_magazine_06_2020 Growers

36 I Cover story bne June 2020
Delayed reaction
Statistics offices across most of the
EU members of Central and Southeast Europe have also now released estimates of their Q1 GDP growth, which was badly affected by the coronavirus pandemic and lockdowns introduced during March. Several states across the region managed to maintain positive growth during Q1 as lockdowns were only imposed towards the end of the quarter, but all are anticipated to contract in Q2 and for the full year.
Of the countries that have released data so far, performance ranges from a contraction of 5.4% q/q in Slovakia to growth of 0.3% q/q in Bulgaria and Romania.
Raiffeisen analysts say that the contractions in GDP in the region are “somewhat less than expected”, as most took a smaller hit than the average 3.8% q/q or 3.2% y/y in the eurozone, with the exception of Slovakia, where GDP slumped by -5.4% q/q.
“The data was slightly more positive for several CEE markets than the analysts' consensus and we expected. With lockdown measures starting in mid- March for many CEE countries, only
Q2 data will show the full effect of the anti-coronavirus measures enforced, and GDP could drop by around 10% or even more in several countries. In Q1 the
first two months were still unaffected
by the crisis in many countries, while retail sales might have profited from panic buying ahead of the lockdowns,” Raiffeisen analysts wrote. They maintain economic projections of recessions in CEE in a range of -4 to -8% for 2020.
The EBRD writes that the Central Europe and Baltics region had entered a cyclical slowdown already in 2019, and the early phase of the global coronavirus crisis in late January 2020 hit selected industries, such as electronics, which heavily rely on inputs from China.
At the beginning of March most countries introduced strict containment measures, including a massive shutdown of businesses and schools. Disrupted value chains are preventing production,
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including in the automotive industry, which accounts for almost a half of industrial output in the Slovak Republic, which reported the biggest slump in GDP during the quarter.
On the other hand, Polish GDP grew by a seasonally adjusted 1.6% y/y in the fourth quarter, easing 1.9pp against the adjusted expansion rate recorded in the fourth quarter, a flash estimate released by the Central Statistical Office (GUS) on May 15 showed. In quarterly terms, the economy marked the expected start of a recession with a drop of 0.5%. That is a bigger q/q drop than during the 2008-2009 financial crisis.
“The figures for Q2 will be much worse. Consumer confidence has collapsed in Poland and survey measures point to job losses on a scale not seen before,” said Capital Economics.
The fallout from the lockdown had
an impact on Hungary’s economic performance in Q1, but to a lesser degree than analysts had projected, according to preliminary figures by the Central Statistics Office (KSH) on May 15. Hungary's annualised Q1 GDP growth slowed 2.2% from 4.5% in the previous quarter, as the coronavirus crisis had a negative impact on most economic sectors in March. On a quarterly basis, GDP contracted 0.4% after a 0.7% increase in Q4.
The KSH said the lockdown had a negative impact on all sectors, but Hungary’s industry, accounting for a third of GDP, remained the engine of growth during the period and market- based services also contributed to growth, albeit at a modest pace.
Despite the shutdown of major car manufacturers, Hungarian industry managed to expand 0.1% in Q1. Hungary’s growth compares favourably to other countries and exceeds the EU average by 5pp and Eurozone growth by 5.6pp, Finance Minister Mihaly Varga commented.
There was also y/y growth in Lithuania in Q1, where GDP was up by 2.5%, according to a first estimate released by Statistics
Lithuania on April 30. In quarterly terms, the coronavirus pandemic drove GDP to a seasonally and working day adjusted fall of 0.2% in the first quarter, compared with a revised expansion of 1.1% q/q the preceding three months.
“The global pandemic has affected Lithuanian growth and derailed a trend of strong expansion. Shutdown of the service economy meant that GDP shrunk in the first quarter of the year [in q/q terms]; however, the strong start meant that contraction was minimal,” Swedbank said in a comment on the figures. “Early successful steps in the health policy meant that sectors such as manufacturing were slightly less affected by [the] pandemic than in the western European countries. Most of the damage will be concentrated in the second quarter [and] economy is expected to shrink 5% this year before bouncing back in 2021.”
Construction buoys Romanian economy
In Southeast Europe, Romania and Bulgaria both saw positive growth in Q1.
Romania’s GDP increased by 2.4% y/y, in Q1, according to the flash estimate released by the statistics office INS on May 15.
This was the strongest performance among EU member states, according to Eurostat. Compared to the previous quarter, the GDP in Q1 advanced by 0.3%, in seasonally and calendar- adjusted terms, while it contracted by 3.3% in the EU on average.
Romania’s economic performance weakened significantly from last year (+4.1% on average in 2019), but surpassed expectations.
The better-than-expected performance was possibly thanks to the fiscal stimulus provided by the Liberal government since last November.
The full impact of the coronavirus lockdown will be reflected in the second-quarter results because the first- quarter results were only moderately affected by the lockdown in the
second half of March after the state of emergency was instated.