Czech, Hungarian Economies to Shrink More in 2013, Capital Says

The Czech and Hungarian economies will keep shrinking in 2013 as the euro region, which buys most of their exports, sinks deeper into a recession, Capital Economics Ltd. said.

While the Czech economy will grow 0.5 percent next year, it will contract for the “best part” after shrinking 0.8 percent in 2012, emerging-markets economists at Capital led by Neil Shearing wrote today in an e-mailed note. Hungary’s economy will contract 0.5 percent, becoming the only eastern European nation to stay in a recession, after shrinking 1.5 percent this year, Capital estimates.

“The highly open economies of central Europe are particularly exposed via trade linkages,” the economists wrote.

The Czech and Hungarian central banks cut interest rates this week after the two economies shrank from the previous quarter between April and June. Hungary’s 2013 GDP growth forecast of 1.6 percent is among the main stumbling blocks in International Monetary Fund bailout talks, which stalled Sept. 6 after the government refused to lower the projection.

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