WOOD Flash – CE4 macro: weak 2Q GDP, as expected

The 2Q preliminary GDP estimates have now been released for the CE4, which have developed broadly in line our view, but weaker than the consensus forecasts. Compared to a year ago, Hungary contracted the most (-2.3% yoy), followed by Poland (-1.3% yoy) and the Czech Republic (-0.6% yoy), while Romania is still expanding far above its peers (+2.7% yoy).
Our reading of the recent data is that 2Q probably saw the bottom of this short cycle; and, in the second half, we should observe a slow pick-up in private spending, as real earnings recover. Downside risks, of course, exist in the near term: a worsening of the Russia-Ukraine war; a slow recovery in manufacturing; and a plausible deterioration of the global financial markets, if the major central banks do not signal a pivot in the coming months. The risks, in our view, affect the time of the recovery rather than the trend. To us, it appears that, with such a strong push via FDI to the CE4 and the improved lending conditions, as well as households’ earnings power, next year should be shaped by an improvement in activity and lower funding costs.