20170214-法国巴黎银行-Central_and_Eastern_Europe_The_trade_channel_23页_1mb

Summary of "Central and Eastern Europe: The trade channel" Report

Core Content

This report analyzes the impact of global trade developments on economic growth in Central and Eastern Europe (CEE), with a focus on Hungary, the Czech Republic, Poland, and Russia. It highlights how the region's economies are interconnected with global trade and how exchange rate fluctuations and oil prices influence their performance.

Main Views and Key Information

Global Trade and CEE Growth

• Global trade is a critical driver of growth in CEE, especially in Central Europe.
• Exports have become the main growth engine since the 2008-09 financial crisis, with many producers integrated into Western Europe's global value chain.
• Hungary is the most sensitive to global trade shocks due to its high export-to-GDP ratio, which is partly driven by high levels of foreign direct investment (FDI).
• The Czech Republic is the most sensitive to exchange rate movements, with a high pass-through effect from the real effective exchange rate (REER) to exports and GDP.
• Poland is less sensitive to global trade and exchange rate swings, but still faces significant export declines with even small trade shocks.

Exchange Rate Impact

• A weaker currency can help offset the negative effects of reduced external demand on exports.
• In Hungary, a 1% weakening of the HUF REER would lead to a 0.6% increase in exports. To offset a 1% decline in global trade, the forint would need to weaken by ~3% in real terms.
• In the Czech Republic, a 1% weakening of the CZK REER would lead to a 1.5% increase in exports. The impact of REER on exports is greater than global trade.
• In Poland, the pass-through from REER to exports is lower, with a 1% weakening leading to only 0.2-0.3% increase in exports. A 4% real depreciation would be needed to offset a 1% trade decline.

Exports and Economic Growth

• Hungary:
  • Export intensity is high, with machinery and transport equipment making up ~60% of exports.
  • A 1% drop in exports would directly reduce GDP by ~0.2%, and considering knock-on effects, total GDP impact could be ~0.3%.
• Czech Republic:
  • Machinery and transport equipment account for ~60% of exports, but manufactured goods are less dominant than in Hungary.
  • A 1% drop in exports would directly reduce GDP by ~0.1%, but the total impact, including effects on domestic demand, is estimated at ~0.4%.
• Poland:
  • Export structure is more diverse, with food making up ~10% of exports.
  • A 1% drop in exports would directly reduce GDP by ~0.1%, and the total impact is estimated at ~0.2%.
• Russia:
  • Goods exports account for ~25% of GDP, making it less directly affected by trade shocks.
  • However, global oil demand is crucial for Russian growth and terms of trade.
  • A 1% drop in oil prices leads to a ~0.5% depreciation of the RUB NEER.
  • Since 2014, the real effective exchange rate (REER) has become a more important factor in Russian export performance than oil prices.
  • A 1% weaker RUB REER could boost economic growth by ~0.4 percentage points.

Key Insights

• Hungary is most vulnerable to global trade shocks due to its high export dependency and FDI levels.
• Czech Republic is highly sensitive to exchange rate changes, making its central bank's decision on removing the EURCZK floor significant.
• Poland is less reliant on external demand, but still requires substantial currency depreciation to maintain export competitiveness.
• Russia is less directly affected by trade disruptions, but its economy is closely tied to global oil demand and oil prices.
• Exchange rate depreciation can help offset trade shocks, especially in CEE countries with high export intensity.
• Protectionism, particularly from the U.S., poses a risk to global trade and could negatively affect oil demand, further impacting CEE economies.

Conclusion

The region's economic growth is closely linked to global trade dynamics. While some countries like Hungary and the Czech Republic are more sensitive to trade and exchange rate changes, others like Poland and Russia have different vulnerabilities. Understanding the pass-through effects of global trade and oil prices is essential for policy-making and economic planning in the region.