Wood Flash - CE4 macro: 1Q23 GDP confirms the relative expected performances, with upside for Poland

The preliminary estimate for real 1Q23 GDP has been released for all the CE4 countries, and confirmed our broad expectations in terms of the relative performances. Compared with a year ago, Hungary is contracting the most (-0.9% yoy), followed by the Czech Republic and Poland (both -0.2% yoy), while Romania is expanding less than before, but well above its neighbours (+2.3% yoy). Relative to our expectations, Poland surprised us the most in 1Q23, in terms of a quarterly rebound, which could be a signal that investment and net exports are recovering faster than we had anticipated. This may warrant a sizeable upgrade in the 2023 outlook in coming months, once we see the detailed GDP estimates in June. On margin, Romania and Hungary surprised us to the downside. In the case of Romania, we suspect that investment and the agricultural sector may be the culprits, as well as the limited turnaround in net exports. As Romania’s GDP is more volatile than most, we do not yet see a case for a change in our broad assessment. For Hungary, the slowdown in construction/real estate is proving to be fairly sharp and the outlook is more uncertain than usual, as we are growing increasingly concerned that no positive resolution between the EU and Hungary, to allow the disbursements of the frozen EU funds, will materialise this year. The Czech Republic, in our view, has shown improving economic momentum in recent months, which has reopened the door to a potential rate hike in June.