Erste Bank Research Team
Erste Bank
Analysts’ View:
Looking Ahead in CEE This Week: After the Greek drama turned significantly negative over the weekend, it is hard to imagine no negative market reactions globally on markets, which will likely result in the weakening of CEE currency and government bond markets as well. We could, of course, reiterate ourselves that the direct linkages between CEE and Greece are rather small. Exports to Greece are negligible, ranging within 0.1-0.5% of GDP for CEE countries, and financial linkage to Greece is either non-existent or has been reduced considerably in the previous year (i.e. Greek bank subsidiaries in Romania). In addition, CEE economies have become more resilient to external financial shocks, as current account deficits have been eliminated and fiscal deficits narrowed well below 3% of GDP. Despite all this, however, it is hard to forecast where CEE assets will be at the end of today or the end of this week, given indications for a massive weakening on European markets this morning. On top of this, despite the collapse of discussions with Greece, comments from politicians in Europe and also on the other side of the Atlantic suggest that the crisis is still no one-way route, further increasing the already high level of uncertainty. What seems sure is that markets in CEE can be in for a roller-coaster ride; seat belts should be fastened.
As for usual events this week, we will have fresh PMI data in the Czech Republic, Hungary and Poland on Wednesday. In addition, the NBR will also have a rate-setting meeting on Wednesday. We expect the NBR to remain on hold, as the expected decline in inflation this year is due to the VAT cut on foods, which can be regarded as a one-off. That being said, given recent news on massive fiscal easing (cutting the main VAT rate from 24% to 19% starting as of next year), the central bank’s decision and comments may be watched even more closely by market participants.
This document is intended as an additional information source, aimed towards our customers. It is based on the best resources available to the authors at press time. The information and data sources utilised are deemed reliable, however, Erste Bank Sparkassen (CR) and affiliates do not take any responsibility for accuracy nor completeness of the information contained herein. This document is neither an offer nor an invitation to buy or sell any securities.
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