PRAGUE (Bloomberg) -- The Czech and Hungarian economies will be hit hard by Volkswagen Group’s emissions scandal, according to Bank of America Corp.
In a worst-case scenario, the fallout from the automaker’s admission that it cheated in U.S. diesel emissions tests may shave between 1 and 1.5 percentage points off Czech and Hungarian economic growth and current accounts, the group’s analysts said.
By comparison, the impact on growth in Poland and Romania will be less than half a percentage point, analysts wrote in a report to clients on Wednesday.
The scandal at VW, which produces engines in Hungary and owns the biggest Czech carmaker Skoda, threatens to hit the group's sales globally.
Exports of goods including cars and car parts to Germany and other European nations have helped revive the economies of the EU’s post-communist members.
"The importance of the auto industry and the strong linkages to German producers put central and eastern Europe in an exceptionally vulnerable position to the Volkswagen fallout," the Bank of America analysts said. "The Czech Republic and Hungary are likely to be affected the most."
The Hungarian central bank is the most likely to react to the scandal's potential drag on economic growth by easing monetary conditions, according to the analysts.
In Russia, VW accounted for about 5 percent of domestic car production last year, limiting the direct impact on the economy from any decline in production, Bank of America wrote. The scandal may curb demand for the country's oil products as Europeans reduce diesel consumption and move into more environmentally-friendly sources of energy, the report said.
"Russia could suffer more from potential structural changes in European fuel demand in the near future," the analysts said. "This could add headwinds to European Union oil and gas demand, potentially undermining Russia's long-term potential economic growth."