ZEW-Erste Group Bank Economic Sentiment Indicator for Central and Eastern Europe (CEE): Economic Sentiment for the CEE Region's Slowdown Partly Driven by Political Turmoil in Turkey

In June 2013 economic expectations for Central and Eastern Europe including Turkey (CEE) drop considerably to the level of January 2013. The ZEW-Erste Group Bank Economic Sentiment Indicator for the CEE region decreases by 20.9 points to the 24.0-points mark. The indicator’s plunge is mostly driven by a sharp decrease of experts’ economic sentiment for Turkey. Driven by the political turmoil and the resulting economic uncertainty in Turkey, the indicator reflecting economic expectations for Turkey has severely decreased by 63.4 points this month. The ZEW-Erste Group Bank Economic Sentiment Indicator for Central and Eastern Europe reflects the financial market experts’ expectations for the CEE region on a six-month time horizon. The indicator has been compiled on a monthly basis together with further financial market data by the Centre for European Economic Research (ZEW) in Mannheim with the support of Erste Group Bank, Vienna, since 2007.

This month’s special question reveals the reasons underlying experts’ assessments: Optimists for the economic prospects of the CEE region point out an improvement of the external environment, a weakening of some local currencies, low labour costs and adequate monetary policy of the National Central Banks as reasons for their positive economic forecasts. On the downside, concerns remain that low domestic demand and unemployment as well as the decrease of foreign investments and political risks such as currently observed in Turkey may hamper an economic upturn of the CEE-region.

Economic expectations for the Eurozone have remained almost unchanged after a marginal increase by 1.1 points in June. Experts point out the stabilization of growth in the region, especially in Germany, as a reason for their positive outlook.

In June the experts’ assessment of the current economic situation for the CEE region has decreased by 19.1 points to a level of minus 12.4 points. The decline comes in spite of the major improvement of experts’ assessment on the economic situation in Hungary and Poland. The negative development of the indicator for the CEE region is mostly driven by a week assessment of the current economic situation in Turkey. The respective indicator for Turkey has dropped by 26.8 points to a level of 2.9 points this month.

For further information please contact

Zwetelina Iliewa, Phone +49 621/1235-346, E-mail iliewa@zew.de

Survey Procedure and Methodology

The Financial Market Survey CEE is a survey carried out among financial market experts by the Centre for European Economic Research in Mannheim (ZEW) and Erste Group Bank AG, Vienna. The target of this survey is to develop indicators describing the economic conditions in Central and Eastern Europe (CEE) as well as in Austria. The CEE region observed in the survey consists of Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia , Slovenia and, since October 2010, Turkey.

The financial experts are questioned on their evaluations of the current business situation, the medium-term prospects of the respective economies and their expectations as to the development of the inflation rate, the short- and long-term interest rates, exchange rates and stock prices on a six-month time horizon. The analysts’ assessments reflect the qualitative direction of the estimated changes. The quarterly ‘Financial Market Report CEE’ contains the results for every Central and Eastern European country in detail.