CEE growth continues, but German slowdown threatens: Ferona

Central and Eastern European economic growth should still reach 3% in 2019 despite slowing on-year, but German growth – to which it is strongly linked – is under threat from various factors. So says Czech distributor Ferona’s corporate audit director, Jan Moravec.

The CEE growth will come despite extremely low unemployment rates and rising wages, according to Moravec, with Poland and Slovakia the top performers, each with GDP growth of 3.5%.

This is down from 5% GDP growth in 2018 in the case of Poland, while Slovakia was the only regional country that saw industrial production increase last year.

Economic growth in the Visegrad 4 (V4) countries is “… strongly related with the German economy,” Moravec said at Thursday’s Eurometal Central Europe meeting in Prague attended by Kallanish. “There are discussions whether it (Germany) is in recession or not. In the last quarter of 2018 they were in minus, this (first) quarter they are in slight plus, so according to definition it should not be a recession but the risk is here, business climate is the lowest [… since] February 2018.”

CEE economic growth is linked strongly with the automotive industry, with a combined regional output in 2017 of around 5 million vehicles, roughly the same as Germany. The region’s original equipment manufacturers are also dependent on the German automotive sector.

The current threats for the V4 countries are electromobility, “Dieselgate”, threats regarding US automotive customs duties, and Brexit. Germany was the eighth-largest steel supplier to the US in 2017, while combined EU supply to the US totalled 6 million tonnes. This is very little compared to EU steel consumption of 150mt.

“On the other hand, the situation is really different for the car industry,” Moravec observed. “If there are (US) customs tariffs for cars, at least according to the German [… chamber] of commerce… Germany would automatically fall into recession.”