Outlook for Central and Eastern Europe 01/2010

Czech Republic 
Inflation starts to rise, but still remains below the CNB's target. The wait-and-see policy of the central bank is the most likely scenario for the first half of 2010. Despite a moderate economic recovery, unemployment continues to climb. Dropping new industrial orders in the coming months remain a major risk of the recovery.
 
Hungary
The 2009 cash-flow budget deficit came out 0.3pp better than the 3.9% of GDP target. The next question is whether the European based ESA figure would differ from this cash-flow based figure or not. Unfortunately, we will see the first ESA data only in March and the revised figure only in September. Nevertheless, our estimate for ESA95 based deficit remains at 3.9% of GDP. 

Poland
Polish Economy is on track for recovery lead by strong construction, improving external demand and positive demographic trends. Nevertheless we expect a slow-down in domestic demand as strong winter and more profound regional lay-offs in construction should weigh on consumer spending. 

Slovakia
The central government deficit reached 2.79 bn € in 2009, but part of the expenditure savings were transferred to the budgets of villages and cities. EBRD revised the GDP growth estimate from 3.5% to 2.8%. Anyway, this should be still the strongest expansion in the CE-4 region.