Czech Republic and Hungarian economies perform below expectations in Q4

The fourth quarter economic growth data for Hungary and the Czech Republic greatly disappointed. Romania and Poland economies performed better and surpassed market projections. However, the full year 2016 economic growth of Poland had already been released, from which the market could form an opinion about the fourth quarter result.

Meanwhile, the Czech economy expanded just 0.2 percent quarter-on-quarter in the fourth quarter of 2016 as compared with consensus expectations of 0.7 percent. This is a considerable undershooting of the projection. Hungary’s economy also grew below expectations. It expanded 0.4 percent as compared with expectation of 0.7 percent rise.

“With these readings, we estimate that Czech GDP grew by 2.3 percent in 2016 and Hungarian GDP by 1.4 percent, well below recent official guidance”, said Commerzbank in a research report.

Policymakers are likely to put the entire blame on the pause in the EU structural funds in 2016. This is an important driver, but the demand drivers were mainly sluggish in most of the second half of 2016. The 2017 economic growth projections might have to be lowered for Hungarian and Czech Republic. However, the PMI, manufacturing and orders data have recovered in the past few months, therefore the first quarter 2017 is expected to record a more positive outcome than projected, stated Commerzbank.