Key events in EMEA and Latam next week

We expect the budget deficit to have narrowed in April from PLN4.5 billion to approximately PLN3 billion, in line with the Ministry of Finance's. VAT revenues should increase after a relatively soft first quarter. Public expenditures related to retirement payouts should garner more attention, as the government introduced a lump sum benefit for the elderly to be paid in late-April and May.

A second GDP estimate should confirm the initial 4.6% YoY reading. The breakdown is likely to show stable consumption at 4.2% YoY and relatively strong investment, with a growth rate of close to 7.0%. The net export contribution should be close to neutral after a strong downward revision of imports.

Industrial production is stabilising thanks to stimulus measures introduced by the government for both households and companies. Accordingly, we expect 1Q growth to be -1.8% YoY, though the recovery in the period ahead will likely be slower than anticipated, given corporate balance sheet vulnerabilities and a weak capital flow outlook.

The main event next week is the National Bank of Hungary’s (NBH) rate setting meeting, but we don’t expect any fireworks. The NBH has made clear several times that it doesn’t intend to change the course of monetary policy until the new staff forecast is available in June. Against this backdrop of a weaker currency and higher inflation, accelerating wage growth and stronger GDP data, the NBH remains tight-lipped.

Hungary posted its second-highest GDP growth rate ever in the first quarter, at 5.3%. And next Friday, we'll get a detailed breakdown of the result. We suspect the figure was driven by domestic factors, with some positives from the trade side, too.

The flash GDP estimate came in at 0.5% quarter-on-quarter and 2.5% year-on-year growth in 1Q. The preliminary figure was broadly in line with expectations but the high contribution from industry came as a surprise. According to monthly figures, this component stagnated in the first-quarter. As such, we wouldn't be surprised by some downward revision to the 1Q GDP figure next Friday. Then again, the gross value added calculation might differ significantly from the real industrial production figures that are available on a monthly basis.