Central bank’s meetings in Czechia and Hungary

This time we begin with last weeks events, as the CEE region has been battling floods after heavy rainfall. We anticipate that the economic impact on GDP growth will remain limited. Despite the floods being as heavy as in 1997 in many places, the affected countries seem to have been better prepared. Not only were the forecasts more accurate, allowing the affected areas not to be taken by surprise, but the countries have also invested in flood control measures as well as retention basins. In the short term (by the end of this year), the industrial sector should receive a negative impulse in all countries impacted by the flooding. Tourism in the regions may suffer as well. Finally, the damage to crops may have inflationary effects. Once the restoration work begins and the reconstruction of buildings and infrastructure takes place, the construction sector will get a boost, adding to GDP in the medium-term horizon.

This week, the meetings of the central banks in Czechia and Hungary are key events in the region. We believe that both central banks will continue with monetary easing. Apart from that, Augusts retail sales growth will be published in Poland and Slovenia. Further, labor market data will be released in several CEE countries. In Hungary, Augusts unemployment rate and Julys wage growth will be released. The unemployment rate will also be published in Poland and wage growth will be released in Serbia. Finally, Moodys should evaluate Romanias rating and outlook on Friday after the market closes.