Hungary and Romania face a near-term electricity supply squeeze due to record-low water levels in the Danube. Our base case is this will be a modest and temporary drag on Q3 GDP that is recouped in Q4, and that the shock will not materially alter the inflation outlook. In the meantime, we expect Q2 GDP data next week to underline the scale of divergence across the region, with Poland’s economy growing strongly while Russia and Romania struggled.
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