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WRAPUP 1-East Europe suffers as trade and industry hit

Published 06/09/2009, 04:59 AM
Updated 06/09/2009, 05:08 AM

(Adds details, comments, background)

By Justyna Pawlak

BUCHAREST, June 9 (Reuters) - Collapsing industry and trade across eastern Europe have pushed local economies into recession in the first quarter, data from Romania, Hungary and the Czech Republic showed on Tuesday.

The region is suffering from the global financial turmoil which has deprived it of cash to borrow and damaged demand for local goods.

In Romania, industrial output figures for April showed a contraction of 9.5 percent on the year, while the trade deficit shrank by 61 percent in the first four months of the year as exports fell by a fifth.

The statistics office revised its gross domestic product estimate for first quarter contraction to 6.2 percent on the year from 6.4 percent, but analysts said the economy was likely to remain in recession in the second quarter.

"There are no good signs in the (Romanian) economy," said Nicolaie Alexandru-Chidesciuc from ING Bank in Bucharest.

"Output fell more than expected ... construction, retail sales dropped sharply. Combined, the figures indicate it is possible the second quarter will be worse than the first."

Domestic demand took a beating, with consumption shrinking by 9.1 percent in January-March and four-month imports collapsing by a third, in a sign that rising unemployment was also taking a toll.

CENTRAL EUROPE IN TROUBLE

Hungarian statisticians revised Q1 GDP data to show an annual contraction of 6.7 percent, more than a preliminary estimate of 6.4 percent, in the worst reading since the central European country began publishing quarterly figures in 1996.

Also on Tuesday, data showed Hungary posted a trade surplus of 429.7 million euros in April after a surplus of 502.6 million in March based on preliminary data.

"Very clearly the slump in industrial production pulled down the indices," said KSH statistician Peter Szabo.

"The consumption expenditure of households also fell significantly," statistician Pal Pozsonyi added. "The only positive thing is that imports fell more than exports, which is naturally due to the low demand in the economy."

In the Czech Republic, the statistics office confirmed a preliminary GDP release showing a contraction of 3.4 percent in the first quarter versus a year earlier.

Separately released May inflation figures showed prices were flat from April, below market expectation of 0.1 percent growth.

"As for GDP, we now have more details, and we can see it is not only about the negative impact of foreign trade but also about the quickly falling investment activity in the Czech Republic," said David Marek, chief economist at Patria Finance. (Reporting by Reuters bureaus in eastern Europe; writing by Justyna Pawlak; editing by Stephen Nisbet)

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