ZEW-Erste Group Bank Sentiment Indicator for Central and Eastern Europe (CEE) - Economic Sentiment Indicators for Central and Eastern Europe Recover

The economic sentiment indicator CEE which reflects the assessment of the financial market experts regarding the economic development in Central and Eastern Europe (CEE) on a six months time horizon increases by 9.1 points in August. Thus, the economic expectations reach the 20.5 points mark. The economic expectations for the CEE region are surveyed monthly together with other financial market data by the Centre for European Economic Research (ZEW) with the support of the Erste Group Bank, Vienna.

The predictions for the economic development in Austria and the Eurozone improve this month as well. The relevant indicator for Austria rises by 5.0 points to 29.5 points. The economic expectations for the Eurozone take on the last place among all the other analysed countries after a slight increase by 2.6 points to 15.7 points.

The current economic situation in the CEE region, Austria and the Eurozone receives a significantly better evaluation by the surveyed analysts in August compared to the previous month. The indicator which depicts the current economic situation in the CEE region rises by 13.6 points and reaches the 0.0 points threshold in August. The respective indicator for Austria changes to a positive value of 17.8 points after an immense growth by 20.0 points. The assessment of the current business situation in the Eurozone improves by 16.9 points to minus 3.9 points.

As a consequence of the previous two months in which the prices of several resources and agricultural products have been increasing the financial market experts predict higher inflationary risks for the CEE region and Austria within the next six months. The respective indicators rise in August by 18.3 points to 45.8 points for the CEE region and by 17.3 points to 45.2 points for Austria. However, the relevant indicator for the Eurozone remains nearly unchanged at 37.0 points.

The predictions concerning the development of the stock market indices for the CEE region (NTX), Austria (ATX) and the Eurostoxx 50 on a six months time horizon improve in the current survey once again. The respective balance for the NTX increases by 15.1 points to 39.5 points. Nearly 60 percent of the survey participants foresee a rise of the stock indices for the CEE region within the next half year.

Croatia

The economic outlook for Croatia improves significantly in August. The respective indicator rises by 19.8 points to 24.4 points. The assessment of the current economic situation increases by 8.4 points. Therefore the respective indicator lies now at minus 25.6 points. After another immense climb in August the indicator reflecting predictions of the Croatian stock indices reaches the highest value of 50.0 points in country comparison in this category. The percentage of survey participants who foresee a depreciation of the Croatian currency (Kuna) rises to nearly 50 percent again in August. Thus, the relevant balance reaches the lowest value among all the analysed currencies which is minus 34.2 points.

Poland

The economic outlook for Poland increases by 8.5 points to 26.5 points. The appraisement of the current business situation also depicts an improvement. The respective indicator grows by 17.6 points to 23.6 points. In August, a higher share of financial market experts expects higher inflation risks within the next six months than in the previous month. The relevant balance increases by 20.4 points and currently reaches 37.8 points. A distinctive percentage of polled analysts, namely 62.5 percent, prognosticate an appreciation of the Polish currency against the Euro within the next six months. The currency indicator wins the first place in country comparison with a value of 47.9 points.

Romania

While in the July survey the economic outlook for Romania still displayed the highest decline in country comparison in the August survey the indicator experiences the highest increase among all the other analysed countries. The respective indicator rises by 32.4 points to 26.1 points. The evaluation of the current economic situation also achieves a significant improvement compared to the previous month by 18.2 points. However, the respective indicator still takes up the last place among the analysed CEE economies with a value of minus 53.2 points. The predictions concerning the development of the Romanian stock indices market within the next six months are also more positive. The indicator which reflects the expectations concerning the development of the stock indices BET experiences the strongest growth in this month, namely by 36.0 points to the 35.9 points mark.

Slovakia

Slovakia is the only country in country comparison which depicts a decline of the economic expectations in this month’s survey. The respective indicator decreases by 4.7 points to 17.5 points. Therefore the indicator takes up the last place among all the CEE countries. Nonetheless, the assessment of the current economic situation improves significantly by 19.8 points reaching 2.0 points. The surveyed experts emphasise the inflation risks in Slovakia far more than in the other CEE countries. The inflation indicator rises by 12.1 points to 50.0 points reaching the highest value in this category.

Czech Republic

Even though the economic outlook for the Czech Republic does not improve as much as the economic outlook of all the other CEE countries the respective indicator of the Czech Republic still remains at the leading position in this category with a value of 32.0 points. The evaluation of the current economic situation in the Czech Republic increases by 13.9 points reaching 13.8 points. The indicator which represents the predicted inflationary risks reaches after a slight increase the second highest value in this category with 49.9 points. 56.2 percent of the financial market experts expect higher inflationary risks in the Czech Republic for the next half year.

Hungary

The economic expectations for Hungary rise by 13.9 points to 23.5 points in August. However, the assessment of the current economic situation worsens slightly by 1.9 points to minus 51.9 points. This is the only decline in this category in country comparison. In August, the financial market experts change their opinion of decreasing inflationary risks to increasing inflationary risks within the next six months for Hungary. The respective balance depicts the highest growth in country comparison as it increases by 22.8 points to 6.1 points. In the current survey, Hungary is the only country with a negative indicator which represents the predicted development of short-term interest rates. This indicates that the survey participants only foresee a cut in short-term interest rates for Hungary within the next six months.

Special Question

In August, the financial market experts are asked to share their opinion regarding the austerity programs of the governments in the CEE countries. According to the survey participants, the austerity package of the Czech government has the best prospects of success. 95 percent of the analysts evaluate the prospects of success of the austerity measures as good or even very good. The assessment of Hungary however is most cautious. 40 percent of the analysts assess the probability of success of the Hungarian austerity program to be bad or even as very bad. 70 percent of the analysts believe that the most effective measure for establishing a long-term budget consolidation is to cut public administration and bureaucracy expenses.

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 the 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 and Slovenia.

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, the exchange rates and stock prices on a six month time horizon. The analysts’ assessments reflect the qualitative direction of the estimated changes.

Among the analysed economies are the CEE region, the Eurozone as well as the Czech Republic, Poland, Hungary, Slovakia, Croatia, Romania and Austria.

The monthly "Financial Market Report CEE" contains the results for every Central and Eastern European country in detail.

For further information please contact

Dr. Mariela Borell, Phone: +49 (0)621/1235-144, E-mail: borell@zew.de