Yesterday, the Central European currencies finally calmed down after the sell off at the beginning of the week. Especially the zloty and the forint were hit by prevailing emerging markets weakness. However, it is worth reminding that Central European economies do not share structural weaknesses of the most vulnerable emerging markets – Turkey or India. Both the Indian and the Turkish economy (along with other emerging economies) have heavily relied on FED´s expansive QE policy that has helped to finance their widening current account deficits. That has never been true for Central Europe. Current account deficit has narrowed from 5.1% GDP in 2010 to 3.5% GDP (estimated for 2013) in Poland and from 3.8% GDP to 2% GDP in the Czech Republic. In Hungary, the current account shows growing surplus for the second year in a row. Furthermore, the whole region is likely going to profit from ongoing euro area recovery in the upcoming quarters.
This morning, the detailed structure of the Polish GDP has confirmed that the largest Central European economy had cautiously accelerated for the second quarter in a row in 2013Q2 (+0.4% q/q). The main growth drivers have still been exports and government consumption. Unlike the export oriented industry that has been doing pretty well, the construction sector continues to be under severe pressure (-4.4% q/q). The crisis in the construction sector continues to weigh on the labour market and limits potential for household consumption (0% q/q).