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

The economic sentiment indicator for Central and Eastern Europe (CEE region) increases in March by 16.8 points to 37.3 points. The CEE indicator is conducted monthly by the Centre for European Economic Research (ZEW), Mannheim, with the support from the Erste Group Bank, Vienna. It reflects the assessment of the economic development for the CEE region on a six months time horizon.

47.1 percent of the surveyed experts expect the economic momentum in the CEE region to improve within the next six month. 43.1 percent predict the business activity to remain unchanged and only 9.8 percent of the polled analysts foresee a decline.

In March the economic expectations for Austria and the Eurozone improve as well. The economic expectations for Austria increase by 8.2 points to the 27.3 points mark. The respective indicator for the Eurozone improves by 5.8 points to 26.6 points.

The evaluation of the current economic situation in the CEE region improves significantly in the March survey by 17.0 points to minus 23.0 points. The evaluation of the current economic situation for Austria and the Eurozone brightens up as well. The respective indicator for Austria climbs by 8.7 points to the 9.4 threshold. The respective balance for the Eurozone increases by 10.0 points reaching minus 28.5 points.

The expectations regarding the inflation rate in the CEE region do not change significantly in March. The corresponding indicator rises by 4.4 to 18.7 points. 56.3 percent of the survey participants predict an unchanged inflation rate within the next six months. By contrast, the expectations concerning a rising inflation rate in Austria and the Eurozone increase. The corresponding indicators soar to 48.8 points and 40.5 points.

52.2 percent of the polled experts expect interest rates to rise within the next six month in the Eurozone. The respective indicator climbs by 9.9 points to the 49.9 threshold.

In the current survey an increasing share of financial market experts predict the stock market indices for the CEE region (NTX), Austria (ATX) and the Eurozone (Eurostoxx 50) to rise within the next six months. Reaching 36.5 points the indicator reflecting the assessment of the development of the NTX receives the best ranking in this category.

Croatia

After the decline in the previous month, the economic expectations for Croatia gain terrain in March. The corresponding indicator increases by 16.9 points to 28.3 points. The assessment of the current situation improves by 5.8 points to minus 35.5 points. The indicator reflecting the assessment of the development of the Croatian Kuna against the Euro reaches the 16.6 threshold in March. Thus, a devaluation of the Croatian Kuna against the Euro within the next six months appears to be likely.

Poland

The indicator for the economic expectations rises by 8.5 points reaching 36.1 points in March. The evaluation of the current economic situation increases significantly by 23.1 to 17.1 points. Thus, Poland is the only country in the survey to reach a positive indicator for this category. An increasing majority of survey participants, namely 65.2 percent, foresee an appreciation of the Zloty against the Euro in the next six months.

Romania

After their strong decline in the last month, the economic expectations for Romania gain terrain in March. The respective balance climbs 16.9 points to the 39.2 threshold representing the second place among all analysed CEE countries in this category. In contrast, the assessment of the current economic situation remains critical. Although the respective indicator increases by 14.9 points to minus 51.1 points, the indicator is last in line this month. An increasing share of analysts expects the Romanian stock market index BET to rise within the next six month. The respective indicator takes up the first place within this category among the CEE countries reaching the 35.0 threshold.

Slovakia

The economic expectations for Slovakia rise by 7.6 points to 26.7 points in March. The assessment of the current economic situation improves compared to the assessment in February. The indicator increases by 18.2 points and reaches the minus 19.5 mark.

Czech Republic

In this month’s survey the indicator of the economic expectations for the Czech Republic increases by 4.8 points to 31.1 points. This represents the smallest improvement in this category in the country comparison. Nevertheless, a high percentage of analysts, namely 47.9 percent, predict no change of the economic activity within the next six months. The balance reflecting the assessment of the current economic situation rises by 20.1 points to the minus 4.2 mark. Similar to the previous month, the highest share of analysts, namely 59.6 percent, predict the inflation rate in the Czech Republic to rise in the next half year.

Hungary

The economic expectations for Hungary climb by 17.1 points to the 43.1 mark in March. Thus, Hungary wins the first place in this category among the analysed CEE countries. 52.9 percent of the surveyed experts expect the economic momentum to improve within the next six month. In contrast, the financial market experts remain cautious with respect to the current economic situation in Hungary. Although the corresponding indicator increases by 23.7 points, its value of minus 41.1 points is the second lowest in country comparison this month. Almost 50 percent of the polled experts predict the inflation rate in Hungary to rise within the next six month. In February only 40 percent shared this expectation. The share of analysts expecting Hungary’s national bank to lower interest rates rises in this month’ survey to nearly 70 percent. In February only 60 percent held this view.

Special Question

This month’ special question deals with the development of private consumption in the CEE region in 2010. The majority of experts, namely 39 percent, foresee a rise in household consumption in comparison to 2009. However, only one percent of the surveyed participants expect a significant increase in private consumption. 44 percent of the experts expect the demand for services to grow at slower pace than the demand for consumer and industrial goods. The majority of the financial market experts hold the view that quality and innovation play an important role for promoting private consumption. Low prices in combination with special promoting campaigns could optimise household consumption whereas the importance of advertisement declines.

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