* WHAT: First quarter growth domestic product flash estimate
data for Czech Republic, Slovakia and Hungary.
* WHEN: Thursday 0700 GMT.
* FORECASTS: Slovak Q1 growth of 8.5 pct; Czech Q1 growth of
5.5 pct; Hungarian Q1 growth of 1.25 pct.
By Michael Winfrey
PRAGUE, May 13 (Reuters) - Economic growth in emerging
Europe is expected to have been pinched in the first quarter by
strong currencies, the slowdown in the euro zone and inflation
that has taken the edge off domestic demand.
First quarter flash gross domestic product estimates from
Slovakia, the Czech Republic and Hungary on Thursday are
expected to show widely divergent growth rates that share common
regional trends.
Two of the export-strong economies -- the Slovak and Czech
-- are seen to have outperformed the euro zone again.
But softening demand for their goods and currencies that
have climbed by 6.2 percent and 11.3 percent, respectively,
against the euro in the last 12 months will take a toll.
"The region as a whole is going to see some moderation in
growth rates because of the mix of slower growth in the euro
zone and foreign exchange appreciation," said Radoslaw Bodys, an
economist at Merrill Lynch.
Inflation has, like the world over, been driven by high food
and fuel costs. But domestic factors like administrative price
hikes have also played a role and could be squeezing domestic
demand, another major pillar of the emerging economies.
According to a Reuters poll, the Slovaks are expected to see
growth drop to 8.5 percent, from 14.3 percent in the fourth
quarter of 2007 -- still robust, especially considering the last
figure was skewed by cigarette hoarding ahead of a tax hike
[].
Czech growth is seen slowing to 5.5 percent, from 6.6.
Analysts reduced their estimates from a median 5.7 percent after
bad trade and output data showed a big drop-off in exports
[].
Hungary is expected to creep forward by 1.25 percent, from
0.8 percent in the fourth quarter, but it too is exposed, as it
exports goods worth some 70 percent of GDP <HUGDP1>.
TALE OF TWO ECONOMIES
The euro zone has so far avoided a larger slowdown as seen
in the United States but is still feeling the pinch. A Reuters
poll forecast growth there dipping to 1.9 percent in the first
quarter, from 2.2 percent in the last three months of 2007.
That appears to have hit central and eastern Europe's output
as producers take in less orders from euro zone customers.
In Slovakia, due to join the euro next year, output slammed
on the brakes to grow just 1.8 percent in March, versus 12.5
percent in February. Analysts said the slowdown was heavily
affected by an earlier-than-usual Easter holiday but lower euro
zone demand still had an impact.
Czech data showed a similar trend, with foreign trade
showing a surplus of 8.12 billion crowns in March, much lower
than the 15 billion forecast <ECONCZ/04>.
In Hungary, spending cuts and tax hikes that brought the
budget deficit to 5.5 percent of GDP last year, from 9.2 percent
in 2006, have hammered growth and stifled domestic demand. Its
business confidence index fell to a three year low in April.
Analysts said despite the effects of easing demand, the
outlook for the Slovaks and Czechs was still positive, but
Hungary had a lot of work to do to get back on track.
"(It) is the tale of two economies. On the one hand you've
got Slovakia, which is going from strength to strength on the
back of substantial capital inflows that have boosted production
capacity," said Neil Shearing of Capital Economics in London.
"On the other hand is Hungary, which is still mired in the
effects of fiscal tightening and political instability, as well
as big imbalances in the economy."
