Key events in EMEA and Latam next week

Next week’s data releases will deliver a somewhat clearer picture about Hungary's economic activity in the first quarter. We see retail sales posting another double-digit growth rate on the back of continued panic buying and the preparations for working from home, which will support non-food shops too. The risks are tilted to the downside on fuel sales. Due to the closure of factories, we expect industrial production to shrink by 5% on a monthly basis, but the PMI will improve in April, reflecting that manufacturers restarted production in late-April. Measuring inflation is hard if not close to impossible with the closure of shops and services. Our expectation is that fuel will have a major impact on the headline reading, pushing it to a 2.4% year-on-year level, a rate last seen in early 2018.

March data will reveal the negative impact of restrictive measures to combat the Covid-19 outbreak. We expect a double digit YoY fall in both retail sales and industrial production, bearing in mind that only the second half of March was impacted, and the decline in April will be about twice as bad.

We expect the Czech National Bank to further cut interest rates by 50 basis points on Thursday next week, though recent CNB communication was not very specific about the intensity of further rate reductions, so some surprise might emerge. Quantitative easing will be mentioned again only as a financial stability tool, so the bar for starting QE anytime soon remains high.

We expect April inflation to come in at 0.7%, pulling the annual figure down to 10.8% from 11.9% a month ago. This is due to the impact of falling energy prices, sluggish demand factors and a supportive base effect while the pass-through from recent currency weakness poses a risk to the outlook.