ZEW-Erste Bank Sentiment Indicator for Central and Eastern Europe - Experts Expect no Change of the Business Cycle Development in the CEE Countries

Within the next six months, the financial experts participating in the survey carried out by the ZEW, the Centre for European Economic Research, Mannheim, which is supported by Erste Bank der oesterreichischen Sparkassen, Vienna, expect no change of the economic development for the Central and Eastern European Countries. The survey participants assess the economic situation for this region as good. For Austria, negative economic expectations predominate, whereas the economic situation is assessed as positive on balance.

In the August survey, the ZEW-Erste Bank Sentiment Indicator CEE that gives the balance of positive and negative assessment for the economic development within the next six months, has dropped once again and now has a value of 0 points. The share of experts with optimistic expectations with regard to the economic development over the next six months balances the share that forecasts a worsening. The drop of 8.8 points is more pronounced than in the previous month. However, the majority of experts, 70.8 percent, does not expect a change. For Austria, the balance for the economic expectations has declined again (-0.6 points). This development can be attributed to the fact that the share of experts forecasting an improving economic development has decreased more strongly than the share expecting a worsening. Both categories lost in favour of the percentage of experts that expect no change at all.

The majority of survey participants assesses the current economic situation in Austria as "good", whereas the balance has decreased by 6.4 points in favour of the share of experts evaluating the state of the economy as normal. Compared to this assessment, the balance for the current economic situation in CEE countries has decreased by 2.8 points. The balances with regard to the economic conditions still differ with a value of 69.2 points for Austria and 56.8 points for the CEE countries.

The inflation expectations of financial experts have developed quite differently compared to the July survey. The drop of the balance is particularly pronounced for Slovakia (-12.4 points). However, except for Hungary and now also for Slovakia, the experts forecast rising inflation rates on balance over the next six months for the countries of Middle and Eastern Europe.

The financial experts give a uniform picture for the stock market development. For all sampled indices, the survey participants expect an increase over the next six months. However, the balances have developed in different directions compared to the July survey. The balances for the Euro Stoxx 50, the PX 50, the WIG and the SBI20 have increased. The share of experts forecasting a rise of the respective stock market index outweighs the share expecting a decrease of the index more clearly. In contrast to this development, the balances for the CROBEX, the NTX, the SAX, the ATX, the BUX and the BET have decreased, partly to a considerable degree.

The balances for the exchange rate shifted in direction of a depreciation compared to the previous month's survey, even if the share of experts forecasting an appreciation outweighs the share expecting a depreciation for all currencies except for the Kuna. Only for the Hungarian Forint the balance increased. Emphasising the positive balance of the Forint, the appreciation expectations now also include the Hungarian currency.

In August, the special question refers to influences that drive the expectations formation of experts with respect to business cycle development. Real variables like incoming orders or capacity utilization, nominal quantities like term structure or exchange rates as well as monetary policy decisions of central banks are assessed by the survey participants with regard to an impact on economic development.

Survey Procedure

The Financial Market Survey CEE is a survey carried out by ZEW Mannheim and Erste Bank der oesterreichischen Sparkassen AG Vienna, among financial market experts and has been conducted monthly since June 2007. It offers insights into the assessment of the current economic situation, and their expectations for Central and Eastern Europe, Austria and the Eurozone for the next six months concerning the general economic situation, inflation rates, interest rates, exchange rates and stock market indices. The CEE region observed in the survey consists of Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia and Slovenia.

The indicators reflect the difference between the percentage of analysts who are optimistic and the percentage of analysts who are pessimistic. The possible outcome of the balance lies between -100 and +100 points. Positive values of the balance indicate that the number of participants expecting a rise in the respective variable outweighs the number of participants with negative expectations.

Contact

Dr. Katrin Ullrich, E-Mail: ullrich@zew.de