Key events in EMEA and Latam next week

Czech's flash GDP growth for 1Q18 is released next week and according to most market forecasts it should remain solid, slightly below the 5% line. While household consumption will remain strong, net exports will contribute negatively due to the high base effect and stronger CZK. The highest uncertainty is related again to the re-newed investment activity, which might cause some surprise in the forthcoming print, though the detailed GDP structure will be released at the end of May.

In Hungary, the Statistical Office will reveal the 1Q18 GDP figures on Tuesday. We saw a better-than-expected retail performance in the first quarter, paired by a weak performance in industry.

Out of the remaining unknowns, the growth of construction is released this Friday, but the agricultural sector remains in the dark. All in all, we’ve already seen upside risks regarding our 3.8% GDP growth call, which could be elevated by good data in construction, meaning that 4% economic activity may not be such a surprise.

An increase in excise duty for tobacco is pushing the inflation profile by 0.2ppt higher over the next 12 months. This means that we are now forecasting CPI at 3.6% year-on-year for December 2018. We see April CPI, which is due 14 May, coming in at 0.7% month-on-month and 5.3% year-on-year, above market consensus. With droughts affecting seasonal food prices there is a material risk for a new peak in inflation to be printed in May.

Retail sales decreased by 1.5% quarter-on-quarter in 1Q18 suggesting a sequential contraction in private consumption. Hence, the likelihood of a sequential contraction in GDP growth in 1Q18 increased. In the first two months of the year, industry performance was rather weak on lower export orders and sentiment indicators point to a disappointing March reading. It remains to be seen if the construction sector, which was quite strong for the first two months of the year, manages to keep QoQ GDP growth afloat. Anyway, we look for a weak 1Q18 GDP growth print.

In the CIS space, next week will see the first GDP estimates for 1Q18. In Russia’s case we had to downgrade our expectations from the initial 2% to 1.8% with downside risks even to this above-consensus figure after weak March 2018 figures, but we see a potential for better performance going forward.

We upgraded our Kazakhstan projection from 3.2% to 4% due to much higher oil prices and solid activity performance. Our Ukraine projection is kept unchanged at 2.1% given that activity performance has been close to our expectations.