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Thursday, March 21, 2019

Europe’s Emerging Economies Back On Track

WARSAW (AFP) – Central and eastern European countries have escaped most of the turmoil that has recently lashed emerging economies as they have been shielded by the recovery in the neighboring eurozone.

“A number of equity markets in Emerging Europe — Poland’s in particular — have proved relatively resilient during the recent emerging market sell-off,” Capital Economics said in its August report.

“We think they may continue to outperform equities in other emerging market regions, even when prices begin to recover again.”

Central and eastern European countries, which are heavily dependant on the eurozone for exports, slumped along with the currency bloc when it languished in recession for the past year and half.

Their share prices also fell, and given the western European dominance in the region, they didn’t benefit heavily from the US monetary stimulus that flooded into many other emerging equity markets and is now causing turmoil elsewhere.

“This has made (the region) less exposed to the prospect of a tapering of the Fed’s asset purchases,” noted Capital Economics.

And now that the eurozone has exited recession, with prospects looking brighter in Germany which sucks up most the region’s goods, central and eastern European economies have also perked up.

Poland, a regional heavyweight with a population of 38 million people, saw its economic growth accelerate in the second quarter of the year.

Its economy grew by a seasonally-adjusted 0.4 percent in the second quarter from the first quarter, up from 0.2-percent growth in the previous three-month period.

“There are many factors pointing to an economic revival, including a more dynamic industrial production and acceleration of household consumption,” said economist Piotr Bielski at Polish bank BZ WBK.

“Companies are signalling an increase in orders, mostly coming from abroad. Consumer sentiment is also improving and is at its highest since 2011.”

The Czech Republic, Central Europe’s third biggest economy after Poland and Austria, for its part exited in the second quarter its longest recession ever, lasting 18 months.

Its gross domestic product (GDP) grew by 0.7 percent in the second quarter from the first quarter — a rate equal to that of European powerhouse Germany, its main economic partner.

The Czech economy is highly dependent on the auto industry, which represents more than 20 percent of its industrial production, and on exports to western Europe.

“The development of the Czech economy will continue to depend largely on recovery in the eurozone,” said Tomas Vlk, analyst at the Prague-based investment bank Patria Finance.

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