A rosier economic outlook is spreading cheer in the euro area. Look further east and the news is even better.
A consumption boom left Romania as the European Union’s top performer last quarter, with gross domestic product jumping 4.8 percent from a year earlier, a Bloomberg poll of economists showed.
GDP also advanced at more than twice the euro region’s pace in Poland, the Czech Republic and Hungary, according to separate surveys before the data are released Friday.
Battered for years as Greece’s debt turmoil crippled the continent, eastern Europe is expanding at rates that have propelled currencies from Hungary to Romania into the emerging world’s best performers.
While a renewed slump in the euro area, a key export market, would snap the turnaround, consumers are reinvigorated by rising employment, lower taxes and cheap loans.
The region “is likely to remain a relative bright spot in the emerging-market world,” Liza Ermolenko, a London-based analyst at Capital Economics Ltd., said in an e-mailed note.
“Growth in the likes of the Czech Republic, Poland and Romania, will only be bettered by a few economies in east Asia.” Hungary’s forint was the past month’s best performer against the euro among 24 emerging-market currencies tracked by Bloomberg, gaining 2.6 percent.
Romania’s leu was next, strengthening 1.6 percent. Poland’s zloty was in fifth after Hong Kong’s dollar and China’s renminbi, advancing 1.2 percent.
Russia, China
Eastern Europe’s resurgence contrasts with recessions in emerging heavyweights such as Brazil and Russia, and a slowdown in China, the world’s second-largest economy.
While economists see euro-region growth of 1.3 percent last quarter, Poland’s economy probably expanded 3.6 percent, while Czech GDP jumped 3.4 percent and Hungary’s gained 3.2 percent. There are still risks, namely that the euro area buys more than half of the exports of some eastern European nations.
“As long as the euro-zone economy accelerates, central and eastern European growth can remain at these levels,” said Daniel Hewitt, an economist at Barclays Plc in London. “But when it reverses, so will growth” to the east. In a positive sign, Greek GDP unexpectedly grew in the second quarter, data released on Thursday showed.
Economies are also in danger of being overstimulated by looser fiscal policy, particularly in Poland and Romania, where governments are gearing up for elections this year and next. Romanian Prime Minister Victor Ponta, battling corruption charges, is trimming sales taxes. Retail sales jumped the most in nine months after he made the first reduction in June.
‘Political Populism’
“The risk of consumption overheating is compounded by political populism ahead of several rounds of elections,” said Dan Bucsa, a London-based economist at UniCredit Bank AG. For now, the region is basking in a combination of high growth and low inflation.
While output gaps are narrowing, economies aren’t running at top speed, capping price pressures even with benchmark interest rates at record lows, according to Radomir Jac, chief analyst at Generali Investments CEE AS in Prague.
“GDP data are expected to be solid again,” he said by phone. “Given the crisis years and the current phase of the economic cycle, it’s not surprising some economies are growing visibly and nicely, while inflation remains low.”
bloomberg.com
A consumption boom left Romania as the European Union’s top performer last quarter, with gross domestic product jumping 4.8 percent from a year earlier, a Bloomberg poll of economists showed.
GDP also advanced at more than twice the euro region’s pace in Poland, the Czech Republic and Hungary, according to separate surveys before the data are released Friday.
Battered for years as Greece’s debt turmoil crippled the continent, eastern Europe is expanding at rates that have propelled currencies from Hungary to Romania into the emerging world’s best performers.
While a renewed slump in the euro area, a key export market, would snap the turnaround, consumers are reinvigorated by rising employment, lower taxes and cheap loans.
The region “is likely to remain a relative bright spot in the emerging-market world,” Liza Ermolenko, a London-based analyst at Capital Economics Ltd., said in an e-mailed note.
“Growth in the likes of the Czech Republic, Poland and Romania, will only be bettered by a few economies in east Asia.” Hungary’s forint was the past month’s best performer against the euro among 24 emerging-market currencies tracked by Bloomberg, gaining 2.6 percent.
Romania’s leu was next, strengthening 1.6 percent. Poland’s zloty was in fifth after Hong Kong’s dollar and China’s renminbi, advancing 1.2 percent.
Russia, China
Eastern Europe’s resurgence contrasts with recessions in emerging heavyweights such as Brazil and Russia, and a slowdown in China, the world’s second-largest economy.
While economists see euro-region growth of 1.3 percent last quarter, Poland’s economy probably expanded 3.6 percent, while Czech GDP jumped 3.4 percent and Hungary’s gained 3.2 percent. There are still risks, namely that the euro area buys more than half of the exports of some eastern European nations.
“As long as the euro-zone economy accelerates, central and eastern European growth can remain at these levels,” said Daniel Hewitt, an economist at Barclays Plc in London. “But when it reverses, so will growth” to the east. In a positive sign, Greek GDP unexpectedly grew in the second quarter, data released on Thursday showed.
Economies are also in danger of being overstimulated by looser fiscal policy, particularly in Poland and Romania, where governments are gearing up for elections this year and next. Romanian Prime Minister Victor Ponta, battling corruption charges, is trimming sales taxes. Retail sales jumped the most in nine months after he made the first reduction in June.
‘Political Populism’
“The risk of consumption overheating is compounded by political populism ahead of several rounds of elections,” said Dan Bucsa, a London-based economist at UniCredit Bank AG. For now, the region is basking in a combination of high growth and low inflation.
While output gaps are narrowing, economies aren’t running at top speed, capping price pressures even with benchmark interest rates at record lows, according to Radomir Jac, chief analyst at Generali Investments CEE AS in Prague.
“GDP data are expected to be solid again,” he said by phone. “Given the crisis years and the current phase of the economic cycle, it’s not surprising some economies are growing visibly and nicely, while inflation remains low.”
bloomberg.com
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