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CEE ECONOMY-Hungary nears technical recession, Poland grows in Q3


Hungary contracts 0.4% q/q on Q3


Polish GDP up 0.9% q/q after Q2 fall


Romania, Bulgaria, Slovakia keep quarterly growth


Recession risks in CEE stirred by high inflation

(Updates story with Polish data, details throughout)

By Jason Hovet

Nov 15 (Reuters) - Soaring inflation sapped central Europe's economies in the third quarter, with Hungary nearing a technical recession and Poland slowing, while avoiding second quarterly contraction, data showed on Tuesday.

Decades-high price growth around the region has cut consumers' purchasing power and industry has reduced output in anticipation of lower demand over the coming quarters.

Data from around central Europe on Tuesday showed the impact of inflation as recession risks grow and complicate central bank efforts to tame the price surge.

In Hungary, one of the region's best performers in the first half, the economy fell 0.4% quarter-on-quarter to post its first quarterly decline in two years.

Growth slowed on a year-on-year basis to 4.0%.

Analysts said the economy was likely to weaken more in the fourth quarter, as inflation tops 20%, outpacing wage gains.

"We've already seen the first leg of the expected technical recession in Hungary, as we expect a further drop in Q4, mainly on consumption and investment activity," ING economist Peter Virovacz said.

"Real wage growth is now in the negative territory, lending activity is shrinking, (and) higher energy bills are reducing the disposable income of households as well."

Analysts expect Hungary's full-year growth to be above 4% in 2022 before a slowdown next year. The government has forecast 1% growth next year.

A Cofidis survey, reported by MTI state news agency on Tuesday showed around 35% of Hungarians plan to spend less over the holidays at the end of this year.


The drop in Hungary follows data already reported showing the Czech Republic's first quarterly contraction since the beginning of 2021 when COVID lockdowns were in place. Analysts see the Czech economy tipping into recession in the fourth quarter.

Poland avoided a second quarterly contraction in the third quarter, posting a rise of 0.9%. Central Europe's biggest economy has fluctuated in quarterly data this year.

While analysts say a technical recession of two straight quarterly contractions may be avoided, the economy is slowing.

Monika Kurtek, chief economist at Bank Pocztowy, forecast GDP dynamics heading toward zero.

"Demand, both consumption and investment, is shrinking. Export orders are declining. The coming months and next year will not be easy," she said.

Elsewhere, the economy of Romania advanced 1.3% quarter-on-quarter, matching growth in the previous quarter. On a year-on-year basis, it expanded by an unadjusted 4.0%. Data revisions from previous quarters "painted a weaker growth picture", Erste Group Bank said.

Bulgaria slowed in the third quarter, while Slovakia expanded by 0.3% and 1.2% year-on-year, helped by better car production.

Erste said the war in Ukraine following Russia's invasion and subsequent surge in energy prices has squeezed Slovakian household consumption and increased costs for companies.

"For the full-year average in 2022, we expect GDP growth at 1.5%, followed by 1.5% in 2023 due to stimulus coming from EU funds," it said. (Reporting by Jason Hovet in Prague, Krisztina Than in Budapest, Alan Charlish and Anna Koper in Warsaw, Luiza Ilie in Bucharest, and Tsvetelia Tsolova in Sofia. Editing by Jane Merriman and Barbara Lewis)