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Hungary: S&P revision

Fri, Oct 2 2009, 12:47 GMT
by Orsolya Nyeste

Erste Bank der oesterreichischen Sparkassen AG


S&P revises the outlook of Hungary to stable from negative

This afternoon, S&P credit rating agency announced that they revised the outlook of Hungary to stable from negative. At the same time they affirmed Hungary's current rating at BBB-.

According to the agency, the outlook revision reflects their view that sustained consolidation efforts will contain the deterioration in the Hungarian government deficit, despite the downside pressures on the economy. The gradual normalization of domestic and international bond markets has lessened Hungary's dependence on the funding package from the IMF and the EU. They expect the fiscal deficit to increase to 4% of GDP in 2009 and 2010 and general government debt to rise to 80% of GDP in 2010. Although they still see risks that the deteriorating economy will continue to put pressure on the Hungary's financial sector, the stabilized exchange rate and the gradual improvement in the availability of external funding will provide some relief. In the end, they said that if strong political leadership emerges next year that is able to undertake needed public sector reform and improve Hungary's growth potential, building a sustained track record of fiscal prudence and setting the high government debt burden on a falling trajectory, this could eventually lead to an improvement in the ratings.

Assessment: The existing BBB- rating is in investment category, but this is just one notch away from non-investment grading. (The S&P downgraded Hungary from BBB to BBB-, with negative outlook on March 30). Improving the outlook of the current rating to stable from negative could mean that Hungary has managed to avoid slipping into the non-investment category, which can be seen as positive.

Market reaction: positive, the forint immediately strengthened below the level of 270 against the EUR.

Published on  Fri, Oct 2 2009, 12:47 GMT

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Hungary: C/A balance 2Q09

Wed, Sep 30 2009, 09:27 GMT
by Orsolya Nyeste

Erste Bank der oesterreichischen Sparkassen AG


C/A balance showed a surplus of EUR 476mn in 2Q09

The C/A balance showed a surplus of EUR 476mn in 2Q09, showing even bigger than expected adjustment in the country’s economic balance situation. We had expected a deficit of EUR 350mn for 2Q09. Please note that Hungary hasn’t had a surplus in the current account since Q3-Q4 1995. The 1Q C/A deficit was revised slightly downwards (from EUR 591mn to EUR 562mn). In addition, mainly based on some methodological changes, the FY2008 C/A deficit was also modified. Instead of the earlier published EUR 8.9bn, the FY2008 C/A deficit amounted to “just” EUR 7.591bn.

The spectacular improvement in the second quarter was on the one hand due to the trade balance. The surplus on the trade balance amounted to EUR 1.398bn in April-June, after EUR 717mn published for the first quarter. Thus, the four quarter rolling trade surplus reached EUR 1.95bn (2% of GDP) by the end of June. The services surplus was EUR 417mn, also higher than expected. The deficit on incomes - which is traditionally high in Hungary – amounted to EUR 1.469bn, showing an improvement of EUR 429mn y/y in 2Q. The reason was (on one hand) lower profit repatriation among multinational firms – as their overall profit may have been lower, due to the ongoing recession. On the other hand, lower interest payments also improved the income balance.

The surplus on the capital balance – which includes the inflow of EU funds - was EUR 415mn in 2Q09. (As for the inflow of EU funds, the NBH has shifted to accruals-based accounting from the earlier cash-flow based method). Thus, the country’s financing ability in the period was positive, amounting to EUR 891mn. This also means that Hungary was not reliant on external financing in the period (apart from the refinancing of the existing debt, of course).

Published on  Wed, Sep 30 2009, 09:27 GMT

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Croatia: August CPI

Tue, Sep 15 2009, 14:03 GMT
by Alen Kovac

Erste Bank der oesterreichischen Sparkassen AG


CPI pressures remained subdued in August

CPI inflation continued to perform under downward pressure, recording a 0.1% m/m decline and posting 1.5% on the annual level. Weak pressures on the monthly level came as a surprise, as the VAT increase took effect in August (VAT was increased as an anti-recession measure by 1pp, to 23%, effective from the beginning of August), though not showing up in the figures. Food, beverages and tobacco products were down 0.2% m/m, while clothing and footwear prices fell 3.8% m/m. On the other hand, energy prices increased 1.4% m/m, mainly resulting from higher fuel prices. Clearly, the August figures had not incorporated the increased VAT rate and, given weak domestic demand, we continue to anticipate that the overall pass-through effect from this increase will be weak. The coming months should not bring dramatic changes to this pattern, with some seasonal categories under pressure. In line with the reversing base effect, we see the annual figures on an upward trajectory in the coming months and remain confident in our 2.9% average inflation forecast for 2009.

Published on  Tue, Sep 15 2009, 14:03 GMT

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Croatia: EU negotiation process set for revival

Fri, Sep 11 2009, 14:58 GMT
by Alen Kovac

Erste Bank der oesterreichischen Sparkassen AG


According to statements made at today’s meeting of the Croatian and Slovenian PMs (Jadranka Kosor and Borut Pahor, respectively), Slovenia is ready to unblock Croatia’s negotiation process and allow the opening of the remaining chapters. The two countries seem to have finally reached an understanding on their border dispute and steps toward its resolution. This is a positive event, as it suggests that Croatia remains on track for EU membership and should boost efforts to accelerate reforms and complete the negotiations. Furthermore, Croatia’s position vis-à-vis foreign investors and ratings agencies would receive a boost from the continuation of negotiations. At the moment, the question mark over the country’s entry date remains. In a positive scenario, entrance during 2011 remains possible, although we see 2012 as a more realistic option.

Published on  Fri, Sep 11 2009, 14:58 GMT

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Slovakia: 2Q09 GDP growth

Wed, Sep 2 2009, 14:32 GMT
by Mária Valachyová

Erste Bank der oesterreichischen Sparkassen AG


Household consumption increased in 2Q09, inventory stocks were depleted further

  • The Statistical Office confirmed its flash estimate of annual GDP at -5.3% in 2Q09. On the quarterly seasonally adjusted basis, GDP increased by 2.2%.
  • Surprisingly, detailed structure revealed increase in household consumption (by 0.7% y/y after -1.2% in 1Q09), despite further increase in the unemployment rate. Economy was also supported by hefty government spending (5.9% y/y).
  • On the other hand, investments continued to fall throughout the second quarter. Similar to Germany, inventory stocks were depleted further and the fall in the fixed investments (-17.6% y/y) deepened over the second quarter. Inventories and fixed investments subtracted approximately 2 and 5 percentage points from the annual GDP growth, respectively. While stocks will likely boost GDP growth in the second half of the year, decline in fixed investments will be a drag on the economic performance in the periods ahead.
  • Gradual recovery in the Euro area and especially in Germany had positive affect on exports, which contracted less than in the 1Q (net exports contributed positively to the annual GDP growth). We expect Slovak economy to show increases on quarterly basis also in the second half of the year, although they might be smaller than the one seen in the 2Q09.
  • We think that the released structure was rather positive (especially potential for growth in stocks as well as increase in household consumption) and along with further signs of stabilisation in Europe imply positive risk to our full-year GDP forecast at -5.5%. In addition, Slovak Stats Office officials said that downward revision of 4Q08 GDP growth is likely (although it will be known only in early December). That means that both GDP growth in 2008 and decline in 2009 would be smaller than otherwise.

Published on  Wed, Sep 2 2009, 14:32 GMT

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Hungary: NBH base rate announcement

Mon, Aug 24 2009, 15:34 GMT
by Orsolya Nyeste

Erste Bank der oesterreichischen Sparkassen AG


CB cut the base rate by 50bp to 8%

After the bigger than expected, 100bp reduction in the base carried out in July, at its today’s rate setting meeting, the monetary council cut the base rate by 50bp, to 8%. The decision did not come as a surprise, being in line with both our expectation and the market consensus. The statement of the monetary council contained not much news. According to the council, the economic growth is expected to resume in 2010. The inflation is likely to rise above the mid-term target temporarily, due to the indirect tax changes, but is expected to move substantially below it in the second half of 2010. The significant improvement in the country’s economic balance situation (in line with the faster than expected adjustment of domestic demand) has again been mentioned. Considering the recent developments in the economy and inflation and in assessments of risks, the council decided to cut rates again. They added that monetary policy might be eased further, if it did not pose a threat to the inflation outlook and if assessments of risks allowed it.

At the press conference, Governor Simor said that the council discussed 75bp and 50bp reductions in the base rate. The final decision (50bp cut) had an overwhelming majority.

The most recent economic forecasts of the central bank’s staff have also been published today. Compared to May, the GDP forecasts for 2009, 2010 and 2011 have remained unchanged (-6.7% y/y, -0.9% y/y and +3.4% y/y, respectively). The inflation prediction for 2009 remained at 4.5% y/y, while it was revised slightly downwards (to 4.1% y/y from 4.3% y/y) for 2010 and slightly upwards (from 1.9% y/y to 2.1% y/y) for 2011. The full report will be published on Wednesday morning.

Assessment: Although the fact that the council did not surprised the market today and carried out a decision which was in line with expectations, uncertainties around the future’s rate path have not really decreased. Furthermore, as the latest economic predictions of the central bank have showed hardly any changes compared to May, they are unlikely to have critical role in the coming rate decisions. The base situation has not changed: the real economy needs lower rates, while the current inflation outlook seems to allow more cuts. Thus, the key factor will remain the assessments of risks, reflected in the development of the forint exchange rate, CDS spreads and the state of the bond market. We maintain our 7.50% prediction for the year-end base rate, with risks rather on the downside.

Published on  Mon, Aug 24 2009, 15:34 GMT

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Hungary: CB cut the base rate by 50bp, to 8%

Mon, Aug 24 2009, 12:16 GMT
by Orsolya Nyeste

Erste Bank der oesterreichischen Sparkassen AG


At its today’s rate setting meeting, the monetary council cut the base rate by 50bp, to 8%, in line with our expectation and the market consensus. As usual, the statement of the council on the decision will be available and the governor’s press conference will start at 14.30.

Published on  Mon, Aug 24 2009, 12:16 GMT

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Slovakia: GDP flash for 2Q09

Thu, Aug 13 2009, 10:46 GMT
by Mária Valachyová

Erste Bank der oesterreichischen Sparkassen AG


Annual contraction of real GDP moderated to 5.3%

  • Real GDP contracted by 5.3% y/y in 2q09 according to the flash estimate of the Statistical Office. This means slight improvement from -5.6% seen in 1q09. The figure was better than we and the market expected (our call: -6.3%, market's average was -6.0%).
  • The Statistical Office also released (for the first time) quarterly seasonally adjusted GDP change, showing stronger-than-expected quarterly growth of 2.2%. We read this as a correction after a sharp fall by 11.0% q/q in 1q09. While the structure is not known yet, we assume that improvement on quarterly basis owes to industry (reflecting improved foreign demand), while sales in trade and services indicated worsening as compared to the 1q09.
  • On consumption side, we expect similar structure as in 1Q09, which means that annual decline was caused by lower exports, decline in household consumption and investments. Inventories might be less of a drag than in 1Q, when companies reacted strongly on falling demand by destocking.
  • Released figure (without knowing detailed structure) does not change our expectation for the full-year decline within -5 and -6% (size depends on whether the SUSR revises last year's data). This morning, the GDP data released from Germany and France brought some optimism, showing both economies increasing by 0.3% q/q. However, the growth was likely boosted by fiscal measures (such as scrap subsidy) and uncertainty regarding speed of economic recovery remains high. We expect rather gradual recovery in Slovakia and expect growth in annual terms no earlier than in 1q 2010.

Published on  Thu, Aug 13 2009, 10:46 GMT

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Slovakia: May Industrial Production

Wed, Jul 8 2009, 10:03 GMT
by Mária Valachyová

Erste Bank der oesterreichischen Sparkassen AG


    Industrial production declined by 24% y/y, slightly more than expected

    • Industrial production fell in May by 23.9% y/y, which is almost unchanged level from -24.7% seen in April.
    • We expected smaller decline at 21%, while market's median stood at 20% (according to Reuters agency).
    • The structure revealed that manufacturing production (industrial production less mining and energy) indeed slightly improved in May as was expected, when it declined by 27% y/y after falling by 29% in April. Improvement owed to smaller decline in car production, which helped to reduce negative contribution of car production by 3pp on annual basis (despite the fact that the biggest Slovak car manufacturer VW had a one week break in May). On the other hand, energy production fell by 8% y/y, spoiling slightly the picture.
    • According to our seasonal and working day adjustment, industrial production fell on the month by 1.2%, while manufacturing alone (ex energy and mining) increased by 1.3%.
    • We assume that both June and July could bring increases in industrial production on monthly s.a. and w.d.a. basis. In June, VW had no break anymore and industrial sentiment improved. Since mid-July, car manufacturer KIA is to resume back to standard 8-hour-working shifts. Also in July, US steel Kosice resumes its production back to full 5-day working week. However, annual decline might still stay above 20% despite monthly improvements. Decline in industrial production can narrow to around 15% y/y during autumn in our view, supported by first signs of recovery in Euro zone.

    Published on  Wed, Jul 8 2009, 10:03 GMT

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    Croatia: 1Q C/A deficit narrows 29% y/y

    Wed, Jul 1 2009, 15:02 GMT
    by Alen Kovac

    Erste Bank der oesterreichischen Sparkassen AG


    • The 1Q C/A deficit landed in the expected region at EUR 1.8bn, declining a robust 29% y/y and bringing the 4Q MA current account deficit down from 9.4% in 4Q08 to 8% in 1Q09. As the trade balance figures suggested, the adjustment occurred, given the narrowing of the merchandise account deficit by 33% y/y to EUR 1.7bn. Imports were heavily hit by depleting domestic demand (-24% y/y), while exports performed somewhat better (-14% y/y). The service account, of secondary importance in 1Q, recorded a slightly higher surplus (ca. EUR 130mn), while tourism related inflows recorded a relatively mild 6% decrease in 1Q. On the other hand, the income account showed more negative trends, with the deficit widening by 34% y/y to EUR 418mn, as a result of the higher cost of debt repayment and stronger profit repatriation in the present environment. Current transfers also offered relatively little surprise, recording a 10% y/y lower surplus at EUR 200mn.
    • On the financing side, net FDI moderated significantly (-64% y/y), thus covering just above 20% of the 1Q C/A deficit, while 4Q MA coverage declined from 72% to 67% in 1Q. The portfolio investments account recorded almost a EUR 0.5bn deficit, mainly as a result of the repayment of a government Eurobond in 1Q. On the other hand, other investments recorded a significant surplus (EUR 1.7bn), as a result of the modified bank FA/FL coverage ratio, allowing banks to withdraw a significant proportion of foreign assets.
    • Overall, 1Q C/A met our expectations; thus, we continue to expect the C/A deficit in the region around 6% of GDP, in line with the real economy outlook and expected 4.5% GDP decline. The merchandise account should remain supportive in the coming quarters, given the continuing weakness in domestic demand, and with the lower commodity prices, should support the figures in nominal terms. While financing needs remain high, the so far stable refinancing and declining C/A deficit support a stable FX outlook, but still largely dependent on the external environment and budget performance. With risks related to the fiscal side and the CNB remaining clearly focused on a stable exchange rate, room for any monetary policy relaxation is very thin and unlikely.

    Published on  Wed, Jul 1 2009, 15:02 GMT

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    Croatia: 1Q GDP, Q GDP down 6.7% y/y

    Mon, Jun 29 2009, 11:10 GMT
    by Alen Kovac

    Erste Bank der oesterreichischen Sparkassen AG


    • 1Q GDP contraction somewhat exceeded our expectations, landing at -6.7% y/y and clearly confirming the strong economic downturn. Private consumption recorded a 9.9% y/y decline, which was roughly suggested by retail trade figures and was in line with our expectations. Investment activity met our expectations quite well, declining a robust 12.4% y/y. Overall, 1Q confirmed that domestic demand took a strong hit. Along with that, the main downside surprise compared to our forecast (ESBe 5.5% y/y) came from the stronger than expected destocking, as inventories plunged 40% y/y in 1Q, putting a strong burden on 1Q GDP growth. Public consumption managed to offset part of the pressures, recording a 3.9% y/y increase in 1Q, which was suggested by the 1Q budget figures. Still, maintaining an expansionary fiscal stance in the coming quarters is unlikely, given the budget rebalance and need to tighten the stance and keep the deficit under control. Net exports landed well into positive territory, with exports (-14.2% y/y) clearly outperforming imports (-20.9% y/y) - largely in line with the trade balance figures.
    • With 1Q09 GDP underperforming our expectation, risks to our 4.5% y/y forecast increased to some extent. We still expect stabilization in the coming quarters and domestic demand coming under less pronounced pressure, with the 3Q performance heavily dependent on the tourist season. Investment activity should remain burdened by weak and more expensive credit and the poor business environment, while private consumption should also take a hit from slowing credit, accompanied by the deteriorating labor market and continued weak consumer confidence. Net exports’ contribution should remain in positive territory throughout 2009. Hence, we continue to anticipate FY09 GDP contraction landing in the 4.5-5% region, accounting for weaker recessionary pressures towards year-end. However, given the growth structure and high dependence on domestic demand and credit, the potential for recovery in 2010 is rather limited, with risks for another negative GDP growth year increasing.

    Published on  Mon, Jun 29 2009, 11:10 GMT

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    Hungary: 1Q09 GDP, April trade balance

    Tue, Jun 9 2009, 10:57 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    GDP fell 6.7% y/y in 1Q09, trade surplus amounted to EUR 429.7mn in April

    The CSO revised its flash GDP estimate of -6.4% y/y for 1Q09 down to -6.7% y/y. Taking the calendar effect into consideration, the economy dropped by 6.1% y/y in January-March. Compared to the previous quarter, GDP declined by 2.5%.

    The breakdown of the supply-side figures showed deep recession in all sectors of the economy. The performance of industry dropped 17.6% y/y, within which the slump in processing industry was 20.5% y/y. The performance of services decreased to a lesser extent, by 3.2% y/y. Agriculture fell by 9.8% y/y, mainly due to high base figures.

    As for the breakdown of the GDP figures (based on final use), households’ final consumption was down 5.9% y/y, while investments fell by 6.9% y/y. Contrary to usual increases, seen in the previous quarters, there has been a cut (HUF 218bn) in inventories also in Hungary, as companies responded to uncertainties around economic prospects and tighter financing conditions. It did not come as a surprise that exports dropped by 18.6% y/y in the first quarter, in line with deteriorating external demand. The only positive thing was that the decline in imports (22% y/y) exceeded that of exports, thus the contribution of net exports to GDP was again positive.

    The difference between the dynamics of export and imports has again been revealed in the April trade balance figures, as well. Trade surplus amounted to EUR 429.7mn in April, exceeding our expectation of only EUR 230mn. The reason is the same: falling domestic demand and poor export prospects lead to a serious decline in imports, as well. The ongoing recession plays a crucial role in the adjustment of the country’s economic imbalances, suggesting large trade surplus and much lower C/A deficit for this year.

    Published on  Tue, Jun 9 2009, 10:57 GMT

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    Slovakia: 1Q09 GDP decline

    Wed, Jun 3 2009, 14:18 GMT
    by Mária Valachyová

    Erste Bank der oesterreichischen Sparkassen AG


    Economy contracted by 5.6% in 1Q09 largely due to investments and stock adjustment

    • The Statistical Office slightly revised its estimate of real GDP decline in 1Q09 downwards from preliminary - 5.4% y/y to -5.6% y/y.
    • The structure of GDP did not look that scary as the headline figure. Lower investment inventories were the main culprit behind the decline (contributed around 3pp to the y/y decline). Industrial factories, facing sharp drop in foreign demand at the end of 2008 were adjusting the stocks to the new lower production levels. Scrap subsidy at the key export markets brought at least temporary revival for the car sector, which should contribute to the larger inventory stocks in the second and third quarter. Fixed investments declined by 4% y/y.
    • Consumption of households slowed down significantly, from the growth by 4.7% y/y in 4Q08 to a decline by 1.2% y/y in 1Q09. Fears from loosing a job and lower future income might have played a role, as the situation of households did not worsen that dramatically to explain the drop; real wages still increased by 1.6% y/y in 1Q09 while employment declined by only 0.4% y/y.
    • Foreign demand declined sharply as already suggested monthly trade statistics; real exports declined by 24.3% while imports declined by 22.6% y/y.
    • We think that the 2Q will bring an improvement on quarterly basis, although annual decline will likely remain in the second and third quarter similar to the 1Q09 decline. For the full year we expect decline of real GDP by around 5%. Speed of recovery will depend largely on the euro area, especially on the improvement in German demand. In the next year, we expect mild GDP growth at around 2.6%.

    Published on  Wed, Jun 3 2009, 14:18 GMT

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    Hungary: New budget deficit target for 2009

    Mon, May 18 2009, 13:27 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    2009 budget deficit target can be raised to 3.9% of GDP

    It has just been announced by the Finance Minister Péter Oszkó at a press conference that the IMF and the EU agree that the 2009 budget deficit target of no higher than 3% of GDP can be raised to 3.9% of GDP. The announcement did not come as a big surprise, because rumors that that the strong recession will prompt both the IMF and the EU to let Hungary raise the budget deficit above 3% of GDP have emerged many times. In 2010, the deficit could also remain above 3% of GDP and it could fall below the Maastricht level of 3% of GDP just in 2011. The reason for the modification of the deficit target is that the economic outlook turned out to be worse than previously expected and contrary to earlier rumors appeared also in the press, according to the latest announcements, there won’t be room for further tax reductions in Hungary this year.

    The government now expects a 6.7% y/y GDP decline for 2009 (their earlier expectation for the 2009 GDP was -5.5- 6%), followed by a 0.9% y/y contraction in 2009. The government’s current view on the economy is among the most pessimistic ones, as even the EC predicted “just” a 6.3% y/y fall in GDP in 2009 in their spring forecasts.

    As for the inflation rate, it is expected to reach 4.5% y/y in 2009, due to regulatory changes. The Governor of the CB András Simor said that the CB and the officials from the EU and IMF think that it is worth focusing on the CPI index, which excludes the price increasing effects of one-off tax changes.

    Assessment: The new budget deficit target for 2009 has had to find the balance between the facts that (1) there is hardly any room for the government to increase the financing needs of the state in the current difficult market environment and (2) if economic outlook is continuously deteriorating, more adjustment measures will be needed, but these would further hinder growth thus the economic policy would become extremely pro-cyclical. Thus, it can be seen as favorable that the IMF and EU officials let the country raise somewhat the deficit in order to avoid this trap. And last but not least, the announced increase of 0.9 percentage points in the deficit target means less than HUF 250bn, which is expected to be acceptable for the markets, as well.

    Published on  Mon, May 18 2009, 13:27 GMT

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    Hungary: GDP fell 6.4% y/y in 1Q09

    Fri, May 15 2009, 10:18 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    According to the CSO’s flash estimate, GDP fell 6.4% y/y in 1Q09, slightly exceeding our expectation of -6% y/y. Taking the calendar effect into consideration, the economy dropped by 5.8% y/y in January-March. Compared to the previous quarter, GDP fell 2.3%. The figures show that recession is strongly biting in Hungary, however, taking the bigger than expected GDP drop in Germany into consideration, the Hungarian 1Q figures could rather be seen as a positive surprise. Details of the figure have not been published yet. The CSO indicated that industrial output and the banking sector suffered the biggest fall in the period. Surprisingly, the contribution of the public sector to growth was positive. The CSO will release details of GDP figures on 9 June.

    As for this year’s prospects, exports could show some signs of consolidation in the coming period, while private consumption will continue to suffer in 2H, based on the ongoing fiscal adjustment.

    Published on  Fri, May 15 2009, 10:18 GMT

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    Slovakia: GDP flash for 1Q09

    Fri, May 15 2009, 10:14 GMT
    by Mária Valachyová

    Erste Bank der oesterreichischen Sparkassen AG


    GDP fell by surprising 5.4% y/y

    • Today, the Slovak Statistical Office released a flash GDP estimate for the 1Q09. The real GDP contracted by 5.4% y/y, well below our and market expectations. We expected quarterly seasonally adjusted decline to be broadly in line with the development in Euro area (i.e. we assumed decline at around 3% q/q), however, decline after seasonal (and cigarettes pre-stocking) adjustment was likely more than double, assuming that the 4Q growth at 2.5% y/y was not revised downwards.
    • The structure will be known on June 3rd. Due to large drop we expect deterioration in all segments (notably in investments). It is possible that household consumption declined as well.
    • The released figure implies that recession in the Euro area hits Slovakia in full extent. For the whole year 2009 the Slovak economy might contract even more than Eurozone (the market currently expects contraction in Euro area at around 3.6%). We will accordingly revise our full-year forecast of Slovak GDP in coming days.
    • Employment in domestic concept fell by 0.4% y/y, while after seasonal adjustment remained unchanged at the level of the previous year.

    Published on  Fri, May 15 2009, 10:14 GMT

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    Slovakia: March CPI Inflation

    Wed, May 13 2009, 09:36 GMT
    by Michal Musâk

    Erste Bank der oesterreichischen Sparkassen AG


    Inflation slowed down to 2.3%

    • Slovak consumer prices declined in April by 0.1% m/m and the annual CPI inflation slowed down from 2.6% in March to 2.3% in April. The market expected a notch higher inflation at 2.4%, our estimate was even higher at 2.6% y/y.
    • The main difference to our forecasts was the food prices, which went down for the third month in a row. They declined by 1% m/m. In this time of the year, the seasonal pattern usually speaks in favour of price growth but it seems that a more important factor was that Slovak retailers lowered prices to counter the cross-border consumer purchases (for Slovaks, weaker currencies of neighbouring countries means cheaper purchases). Compared to last year, food prices were lower by 2.1%. On the contrary, fuel prices grew, as world oil prices are on the rise amid recovery hopes and better market mood.
    • On Friday, HICP inflation is out. Based on today's data, we expect slowdown from 1.8% y/y to 1.4% y/y.
    • We expect further deceleration of inflation. In May and June, we expect CPI inflation around 2% and it could decline further towards 1% in the third quarter.

    Published on  Wed, May 13 2009, 09:36 GMT

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    Croatia: 2008 current account deficit at 9.4% of GDP

    Thu, Apr 2 2009, 08:42 GMT
    by Alen Kovac

    Erste Bank der oesterreichischen Sparkassen AG


    The current account deficit in 4Q08 amounted to EUR 1.940mn, hence practically unchanged with respect to 4Q07 and broadly matching our expectations. Pressures on the merchandise account eased, as the deficit increased only 1.1% y/y (EUR 2.5bn), broadly in line with the trade balance figures, as exports declined by 5.3% y/y and imports fell 2.1% y/y. The service account performed better than expected, as the surplus increased by 40% y/y (EUR 470mn), supported by stronger inflows (+14.8% y/y) driven by tourist activity. The income account showed a rather strong deterioration, as the deficit increased by a robust 116% y/y (EUR 218mn), driven by weaker inflows (-12.5% y/y) and expected higher outflows (18.9% y/y). Current transfers presented little surprise, remaining practically flat and recording a minor 3.3% surplus increase to EUR 271mn. The FY08 figures were in line with expectations, as the deficit landed a notch below the expected 9.5% of GDP. The outlook for 2009 regarding the current account imbalances remains favorable overall. The merchandise account is set to offer some relief in 2009. Despite the contraction on the export side, falling domestic demand in combination with lower need for export related imports should support trade balance deficit contraction in 2009. The service account remains the greatest risk, as the tourist sector outlook is still quite unclear. While we are expecting a mild decline in the double-digit region, a more negative performance cannot be ruled out. The income account is also expected to widen, given the increased cost of debt refinancing and higher profit repatriation. Overall, we see the C/A comfortably below 8% of GDP, with clear pressures in the case of a stronger narrowing of the C/A deficit. A stronger than expected economic contraction (easing the pressure on the trade balance) and no negative surprise from the service account performance would support C/A deficit narrowing to below 7% of GDP.

    On the financing account, FDI inflows (EUR 679mn) recorded a minor decline on the annual level (-6.4% y/y), despite hefty inflow related to MOL’s acquisition of an additional stake in INA. Hence, on the annual level, FDI inflows were 20% lower. Thus, FDI C/A deficit coverage declined from 113% to 66%. Portfolio investments (EUR -615mn) were negative, mainly as a result of asset purchases, while other investments were 22% higher in 4Q (EUR 1,144mn), showing the expected pressures on debt-creating financing. Given the insufficient financing account surplus, pressure on FX reserves has been present, resulting in a EUR 740mn decline. We continue to anticipate risks on the financing side, given the declining FDI inflows and the questionable ability to attract significant debt-creating inflows to cover the C/A gap in 2009. Hence, pressure on FX reserves in 2009 is likely to remain, with stability largely dependent on the external environment and refinancing options - especially those for the corporate sector.

    Published on  Thu, Apr 2 2009, 08:42 GMT

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    Fixed Income Monthly Croatia March 2009

    Wed, Apr 1 2009, 12:54 GMT
    by Alen Kovac

    Erste Bank der oesterreichischen Sparkassen AG


    Highlights

    • Budget rebalance to set the ground for Eurobond issue
    • S&P lowered local currency rating to ‘BBB’ outlook remains negative
    • Money market pressures eased
    • FX market stabilized in March
    • GDP growth slowed to 0.2% y/y in 4Q
    • 1Q monthly frequency indicators looking poor
    • Inflation accelerated to 4.2% in February

    Budget rebalance: Cuts on expenditure side, deficit target revised to 1.6% of GDP

    Last week, the first budget rebalance was presented to the public, the first step toward adjusting the fiscal side of the real economy’s performance. On the expenditures side, the adjustment amounted to HRK 5.4bn, bringing the figure to HRK 121.6bn. On the other hand, the revenue side is expected to underperform the initial budget by HRK 8bn, based on the GDP growth estimate of -2% (earlier: 2%) for 2009. Hence, the budget deficit gap has been revised from 0.9% of GDP to 1.6%. Taking into account the looming local elections, the budget rebalance and (especially) the public wage bill cut of HRK 1.4bn are a positive sign. A second round of adjustment after the elections (most likely after the tourist season) is likely, as the revenue side is likely to further underperform and the government must balance the need to sustain the deficit and tackle recession pressures. Overall, we continue to see the fiscal target as not being met, assuming a deficit of around 3% of GDP. Still, this first step should set a favorable basis for the announced Eurobond placement, which is likely to attract adequate investor interest and put off the need for an IMF deal.

    Published on  Wed, Apr 1 2009, 12:54 GMT

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    Hungary: Moody's downgraded Hungary

    Tue, Mar 31 2009, 11:47 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Moody's downgraded Hungary from A3 to Baa1

    After the S&P downgrading seen yesterday, today another credit rating agency, the Moody's announced that they cut Hungary's current rating to 'Baa1' from ‘A3’. The outlook of the new rating is negative.

    According to the agency, the actions reflect the impact of the current economic crisis on the Hungarian government's financial strength. „When the global economic crisis set in, the Hungarian economy was already in a weak position relative to its Central European peers. Given its sizeable external financing needs, Hungary is particularly exposed to the current environment." Moody's believes Hungary is hampered by its limited monetary and fiscal policy maneuver, due to exchange rate weakness and adversely affected debt metrics, respectively.

    Please note however, that before this announcement Hungary’s rating at the Moody’s had been three notches higher than at the S&P and two notches higher than at the Fitch.

    Market reaction: neutral, as even after this step, Hungary’s current rating at the Moody’s is still standing above the ratings of both the S&P and the Fitch. The real danger could come from the S&P, as more downgrading from their side pushes the country’s sovereign rating into non-investment category.

    Published on  Tue, Mar 31 2009, 11:47 GMT

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    Hungary: S&P downgrade

    Mon, Mar 30 2009, 16:08 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    S&P downgraded Hungary from BBB to BBB

    This afternoon, S&P credit rating agency announced that they cut Hungary's current rating to 'BBB-' from BBB. In addition, the rating outlook will be negative.

    According to the agency, the downgrade moving reflects the ongoing deterioration in the key Hungarian economic and fiscal indicators. Pressure on public finances continues to mount as revenues fall short, the government debt ratio mounts and the risk of financial sector contingent liabilities materializing increases.

    The agency expects the Hungarian GDP to contract by 6% in 2009 and by another 1% in 2010, which will make it difficult to achieve the budget deficit target of 2.9% of GDP for 2009. They expect the government debt to rise to 83% of GDP in 2010, from 73% in 2008.

    The negative outlook suggests sustained downside risks to the ratings. "Further deterioration in Hungary's economic and fiscal outlook, signs of liquidity or solvency problems in the financial sector, or a period of prolonged political paralysis could lead to a further downgrade of the ratings."

    Assessment: The new BBB- rating is still in investment category, but this is just one notch away from non-investment grading, which could be frightening on the markets, especially taking into consideration the fact that the negative outlook suggests further downgrading. Based on the agency’s comment, it seems that apart from the current economic downturn, affecting negatively Hungary, the current political turmoil have had some role in today’s step. The new government (expected to be formed on April 14) with the leadership of Mr. Bajnai should carry out further cuts on the expenditure side of the budget in order to keep the deficit below 3% of GDP. The question is now whether they have enough support in the Parliament to make these steps. Thus, we share the view that the current more uncertain political situation, as well as continuously deteriorating growth outlook poses risks to the budget and public debt. However, the agency’s fears regarding signs of liquidity or solvency problems in financial sector seem exaggerated, in our view, as the new liquidity tools introduced by the CB (especially, the 5bn euro swap facility) have decreased tensions on the FX swap market and improved the overall situation, compared to October.

    Market reaction: very negative, the forint exchange rate fell to 313 against the EUR, than slightly corrected. Based on the earlier tough comments of the central bank, however, we think that they will be ready to push the forint back below 310. Apart from the possible direct interventions on the domestic currency markets, the likelihood of a rate hike has increased, in our view.

    Published on  Mon, Mar 30 2009, 16:08 GMT

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    Hungary: Base rate announcement

    Mon, Mar 23 2009, 14:51 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Central bank kept the base rate on hold (9.50%)

    The central bank kept the base rate on hold (9.50%) at its today’s rate setting meeting. The decision did not come as a surprise. The forint exchange rate and the financial stability have been in the focus of the statement, while the tone of it has not really changed. According to the council, further weakening of the forint exchange rate could have a harmful effect on the capital position of the domestic financial intermediary system in the medium term, while the expected stimulative effect on output may be questioned.

    As for economic growth prospects, the risk of an even deeper recession than previously expected has increased. On the other hand this will lead to lower financing needs of the economy.

    As for the inflation, it has decreased to a level consistent with price stability in recent months. Inflation of services has been falling sharply for several consecutive months, due to the economic downturn. However, the pass-through effect of the weaker exchange rate into the prices of “tradables” is adding upside risks to inflation.

    The financial stability will remain a key factor in the bank’s rate decisions and the council will continue to focus on preventing a persistent deviation of financial market conditions from economic fundamentals. The bank is ready to use the full range of monetary policy instruments at its disposal.

    At the press conference Governor Simor said that the “hold” decision had a strong majority. However, the council discussed the option of 100bp hike, too. He added that the forint exchange rate had crucial role in the bank’s decisions. He repeated that the bank will use all tools to have impacts on the forint.

    Published on  Mon, Mar 23 2009, 14:51 GMT

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    Hungary: Politics – resignation of the PM

    Mon, Mar 23 2009, 13:20 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    On Saturday, on the annual meeting of the Socialist Party, the Prime Minister Mr. Gyurcsány resigned from his position, by saying that he is ready to stand aside and hand over crisis management to a new government. Gyurcsány does not plan to give up his political carrier, as he will remain the president of the Hungarian Socialist Party.

    Gyurcsány intends to initiate a motion of no confidence vote in the Parliament on April 6. The Socialist Party has 189 seats in Parliament, enough to put forward a motion of no confidence, as this requires a least one-fifth of the total 386 seats. Then, the Parliament could elect a new PM on April 14, which requires 194 votes. Given the fact, that the Socialists are governing in minority now, they would need support for electing the new PM from at least one of the two smaller parties - the Free Democrats (SZDSZ) – which had been the coalition partner of the Socialists until May 2008 - and the Hungarian Democratic Forum (MDF). If they come to an agreement, a new government will be formed by the end of April. Thus, the door is open for the parties now to start discussions on the new PM. As the SZDSZ and the MDF are unlikely now to support a candidate coming from the Socialist party, the „compromise“ person could rather come from the outside.

    As far as the biggest opposition (and currently the most popular) party, FIDESZ is concerned, they are unlikely to take part in formation of any government without elections. Instead, they are likely to demand for early elections. It has lower probability, however, as this is absolutely not in the interests of the other three parties, given their low popularity among electors. So they are expected to find a joint candidate for the position of the PM and an expert government could operate until the next elections, due in spring 2010. Early elections could come if Gyurcsány formally resigns and the Parliament fails to approve a candidate within 40 days.

    Market reaction: So far, markets have been reacting moderately to the political events, although the fact that investors do not like political uncertainty. The reason could be that the minority Socialist government has been very narrow room of maneuvering, despite the urgent tasks of handling the negative effects of the crisis, managing the budget (as in order to keep the deficit under 3% of GDP, further adjusting measures should come, due to worsening economic prospects) and carrying out deeper reforms. The weekend events may open room for the solution of recent situation; however, the longer run reaction of the markets will strongly depend on the commitment of the new candidate to structural reforms.

    Published on  Mon, Mar 23 2009, 13:20 GMT

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    Croatia: S&P rating downgrade

    Tue, Mar 17 2009, 11:28 GMT
    by Alen Kovac

    Erste Bank der oesterreichischen Sparkassen AG


    S&P lowered local currency rating from 'BBB+' to 'BBB'

    -Standard & Poor's lowered its long-term local currency sovereign rating to 'BBB' from 'BBB+', while the longterm foreign currency rating was affirmed at 'BBB+' and the outlook remained unchanged at 'negative'.

    -The main rationale behind the downgrade was the intensified external pressure and diminishing economic policy options. Additionally, the exchange rate regime and lack of fiscal policy flexibility were also noted in the S&P press release.

    -The negative outlook implies risks of a further downgrade in case of further deterioration of the external environment, tighter and more expensive access to financing and resulting pressures on the exchange rate and economic performance. Also, the lack of an adequate policy response implies increased risks of a further downgrade.

    -In light of the current situation, the S&P move came as no big surprise and the stated rationale is a broadly expected and known story. While some negative market reaction could occur, we do not expect a significant movement. The rating outlook should remain dependent on the external environment, given the strong refinancing needs in 2009. To support that, a sound fiscal position is one of the prerequisites; hence, the budget rebalance should provide some answers.

    Published on  Tue, Mar 17 2009, 11:28 GMT

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    Slovakia: 4Q08 GDP growth

    Thu, Mar 5 2009, 14:47 GMT
    by Mária Valachyová

    Erste Bank der oesterreichischen Sparkassen AG


    Economic growth at 2.5% in 4Q08 was driven by household consumption

    - The Statistical Office slightly revised its estimate of real GDP growth in 4Q08 from previous 2.7% down to 2.5% y/y. Also, the third quarter growth was revised down to 6.6% from previously reported 7.0% y/y.

    - As expected, the key GDP driver was household consumption (increasing by real 4.7% y/y) despite the fact that real wages declined by 0.2% y/y. Contradictory to the unemployment rate calculated monthly by Labour Bureaus, the unemployment rate obtained from quarterly surveys fell to 8.7%. We expect nominal wage growth to stay modest in the quarters ahead, however, combined with falling inflation should put the real wage growth at around 2.5% on average in 2009. We expect household consumption to stay the main growth contributor throughout 2009, along with the higher government consumption (which increased only by 2.3% y/y in 4Q08).

    - Investments decelerated due to financial crises and higher cautiousness of financial sector, as well as due to lower demand (worries about future income and sales have likely entered into the decision making of both firms and households). The growth of fixed investments thus slowed down from 7.3% y/y in 3Q08 to 1.4% in 4Q08.

    - Recession in the Euro area showed up in the decline of foreign demand as was indicated by the monthly foreign trade data. Indeed, real exports of goods and services declined over the same quarter year ago by 7.8% while at the same time imports declined by 6.7% y/y.

    - The ongoing weak performance of Euro zone countries will translate into lower demand for Slovak production also in coming months. The Slovak economic sentiment indicator dropped further in February; in addition, outage of gas supply could show up in the first quarter GDP growth rate even though some of the missed production could have been caught up in February and March. Therefore, it is likely that the real GDP growth slowed down further in 1Q09. At the moment we see downside risks to our full-year GDP growth estimate at 2.5%.

    Published on  Thu, Mar 5 2009, 14:47 GMT

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    Hungary: Rating outlook

    Mon, Mar 2 2009, 17:42 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Fitch cut Hungary’s current rating outlook from stable to negative

    This afternoon, the Fitch credit rating agency announced that they cut Hungary's current rating outlook to negative from stable. However, they left the foreign currency rating unchanged at BBB.

    According to the agency: “the negative outlook reflects the continued deterioration in Hungarian and European economic prospects, which combined with on-going pressure on Hungary's balance of payments and currency, increase the risk that Hungary's external and public debt profile will worsen by more than anticipated when its sovereign ratings were downgraded last November. Contrary to our expectations at the time, the IMF-led support package has not yet cemented macroeconomic and financial stability."

    Market reaction: the forint has slightly weakened.

    Published on  Mon, Mar 2 2009, 17:42 GMT

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    Hungary: Base rate announcement

    Mon, Feb 23 2009, 14:56 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Central bank kept the base rate on hold (9.50%)

    As expected, the central bank kept the base rate on hold (9.50%) at its today’s rate setting meeting. The statement of the council will be available at 14.30.

    Published on  Mon, Feb 23 2009, 14:56 GMT

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    Hungary: 4Q08 GDP, January CPI

    Fri, Feb 13 2009, 15:34 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    According to the CSO’s flash estimate, GDP declined 2% y/y in the last quarter of 2008 - after the 0.8% y/y increase seen in 3Q08. Taking the calendar effect into consideration, the economy dropped by 2.1% y/y in October-December. Compared to the previous quarter, GDP dropped 1%. As the q/q indicator was also negative in the third quarter (- 0.5%), a technical recession has arrived, as two quarters declined in a row. In FY2008, GDP rose just a tiny 0.6% y/y. The CSO indicated that industrial output and financial services pulled down the GDP figure, while the performance of agricultural production improved it. The CSO will release detailed figures on 11 March.

    As for the GDP growth prospects, the outlook is rather dim for 2009. The 4Q08 figure suggest deeper recession for this year, which is expected to be driven by the sharp drop of industrial exports, while the contribution of domestic demand would not be able to offset this. The economy downturn is expected to be the deepest in the first half of the year.

    Consumer prices increased by 0.6% m/m in January. Thus, the 12-month inflation rate further slowed to 3.1% (from the 3.5% published for December 2008). Thus, the mid-term inflation goal of 3% y/y was practically reached in January. Food and services prices rose above the average last month (2.2% and 0.9% m/m, respectively). There was a decline on monthly level in clothes and fuel prices, however. Prices of durables increased by 0.5% m/m, which could be explained by the forint weakening. The seasonally-adjusted core inflation rose just 0.1% m/m. Thus, the 12- month core rate also slowed, to 3.4% from 3.8% y/y, seen in December.

    The above figures suggest the continuation of the rate cutting cycle of the CB. We think however that the current rate cutting cycle will decelerate and no rate change expected at the February rate setting meeting. The reason is the vulnerability and the increased volatility of the forint exchange rate. In the current market environment, thanks to the exchange rate factor, too fast rate cuts could jeopardize the country’s financial stability.

    Published on  Fri, Feb 13 2009, 15:34 GMT

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    Slovakia: January CPI Inflation

    Wed, Feb 11 2009, 11:23 GMT
    by Michal Musâk

    Erste Bank der oesterreichischen Sparkassen AG


    Inflation slowed down in January, euro adoption with no significant impact

    - In January, prices grew by 0.7% in a month-to-month comparison and above our 0.5% estimate. But since the price growth was lower compared to last year, the annual inflation slowed down to 3.7% y/y (we expected 3.5% y/y growth, the average market forecast was 0.1pp higher) from 4.4% y/y in December.

    - The biggest surprise for us the hike of electricity price by more than 14% m/m, even though previous media reports spoke about lower growth (and just for a smaller part of households). On the contrary, the assumption of cheaper heat energy was fulfilled, as its price declined by almost 9% m/m.

    - Euro changeover effect spoke rather in favour of lower price growth, at least in January. For example, food prices went up but much less than is common for this month of year. Slower price growth compared to traditional seasonal pattern was seen particularly in case of fruit and vegetables, whose prices tend to grow significantly in winter. Altogether, food prices went by 0.7% m/m, while in previous four years, the January growth was within 1.4% and 2.2% m/m. Our proxy for demand inflation also slowed down (CPI ex regulated prices, food, fuels and imputed rents) from 2.4% y/y in December to 2.1% y/y. The growth of prices of services and goods aside from regulated items and food was thus higher than in other months but slower than is common for this period of year (in January, higher number of shops adjust their prices). Hence, it is possible that the companies were afraid of penalties or negative publicity. Of course, we cannot exclude that the effect might have shown up in other months in 2008 or will affect price adjustments in 2009 (we do not expect a signiificant impact). Depreciation of currencies of neighbouring CE3 countries might have helped to a lower price growth, too.

    - Based on today's data, we expect HICP inflation to slow down from 3.5% y/y in December to around 2.8% y/y in January.

    - In the coming months, we assume further gradual slowdown of CPI inflation, which will average in out view around 3.5% y/y in first half of 2009.

    Published on  Wed, Feb 11 2009, 11:23 GMT

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    Hungary: Base rate announcement

    Mon, Jan 19 2009, 14:29 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Central bank cut the base rate by 50bp to 9.50%

    As expected, the central bank cut the base rate by 50bp to 9.50% at its today’s rate setting meeting. The statement of the council indicated that the inflation would remain well below the mid-term target and the prospects of the real economy had further deteriorated. The decline in the industrial output was bigger than expected, suggesting weaker external demand. The deeper than expected recession could lead to even lower inflation rate. Apart from the inflation and recession factors, the monetary policy has to focus on the financial stability and must ensure the continuity in capital flows. According to the council, risks around the external financing have mitigated in the recent period, but the council still has narrow room of maneuvering. The added, however, that as the state of financial markets allows, the base rate would be cut further.

    The press conference has been held by the Vice Governor Karvalits, at which he said that the council discussed three options: a 50bp cut, a 75bp cut and 100bp reduction in the base rate. Most members voted for a cut of 50bp. The recession factor has also been mentioned at the press conference, as well. Karvalits suggested that the GDP forecasts would be revised downwards in the next Inflation Report (scheduled for February). (In the November report, the staff projected a GDP decline of 0.2-1.7% y/y for 2009).

    As for the forint exchange rate, Karvalits said that the depreciation of the forint has not been so significant to have strong impact on the inflation outlook or financial stability and that the council examines long term trend, instead of short term movements. As for the market rumors, regarding an FX swap agreement with the Swiss National Bank, in order to provide Swiss franc liquidity for the markets, Karvalits said that conditions are being worked out. However, the spokesman of the Swiss National Bank said to Reuters this afternoon that the SNB has reached an agreement with Hungary's central bank to swap Swiss francs for euros, though the fine detail has still to be decided. Nevertheless, the agreement could mitigate tensions in the local banking system around the Swiss franc liquidity, and could make the CB base rate more effective.

    As for the base rate outlook, after today’s decision we do not change our current forecast. The base rate could be reduced to 8.50% by the end of March and could stand at 7% at the end of the year.

    Published on  Mon, Jan 19 2009, 14:29 GMT

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    Hungary: CPI inflation − December

    Thu, Jan 15 2009, 11:00 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    CPI further slowed to 3.5% y/y in December

    Consumer prices declined 0.3% m/m in December. Thus, the 12-month inflation rate further slowed to 3.5% (from the 4.2% published for November). The 2008 annual average inflation rate was 6.1%. The December actual figure did not come as surprise, meeting market expectations. As expected, the main driver of the December slowdown was the 9.4 m/m decline in fuel prices, which pushed the headline index down by another 0.5 percentage points. Other items did not show significant changes on monthly level. (Food prices rose slightly (0.2% m/m)). The seasonally-adjusted core inflation rose 0.2% m/m. Thus, the 12-month core rate also slowed, to 3.8% from 4.1% y/y, seen in November.

    The disinflation process is to continue in the coming months, mainly driven by the food and fuel factors and despite the weaker forint, inflation will reach the 3% mid-term inflation goal already in 1Q09. The inflation outlook allows the continuation of rate cuts for the central bank next Monday, however, current market turbulences make this scenario less certain. Nevertheless, we can not exclude that the CB will carry out a rate reduction, however, the magnitude of it may be just 25bp, instead of 50bp, seen in the previous months.

    Published on  Thu, Jan 15 2009, 11:00 GMT

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    Slovakia: December inflation

    Tue, Jan 13 2009, 10:04 GMT
    by Michal Musâk

    Erste Bank der oesterreichischen Sparkassen AG


    December inflation slowed down significantly to 4.4%

    - The annual price growth slowed down significantly from 4.9% in November to 4.4% in December. Released figure was below our 4.8% forecast and market consensus at 4.7% y/y. On a monthly basis, prices declined by 0.2%.

    - As expected, fuel prices declined (reflecting oil price decline at the world market) but somewhat surprisingly, food prices also reported a 0.1% monthly decrease, while our expectation was a mild growth (which is typical for this part of the year). The annual food price growth slowed down from double digits in summer to 2.5% y/y. Contrary to our estimates and significant increases in the previous months, imputed rents stayed unchanged in December.

    - Inflation slowdown also reflects recession in the Eurozone and the US, which means lower worldwide commodity prices and as a consequence, cheaper fuels and food in Slovakia. Partial data also indicate mild slowdown of demand pressures in Slovakia.

    - On Thursday, December HICP inflation is due out, that should slow down from November's 3.9% y/y to 3.5%. On a monthly basis, we expect a decline by 0.1%.

    - Beginning of this year should bring slowdown of CPI inflation to 3.5-4.0% y/y. It will be interesting to see the response of traders to euro introduction. Based on experience of countries that joined the Eurozone in the past, the impact of "rounding" should not exceed 0.3pp in our view. On the other hand, January is a month, when traders (even when there is no currency switch) more frequently reprice their goods and take into account change of costs over the previous period.

    Published on  Tue, Jan 13 2009, 10:04 GMT

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    Croatia: 3Q Balance of Payments

    Fri, Jan 2 2009, 14:11 GMT
    by Alen Kovac

    Erste Bank der oesterreichischen Sparkassen AG


    3Q C/A surplus narrowed 11% y/y

    Current account surplus in 3Q08 stood at EUR 1.85bn, hence confirming poor balance of payments trends and being 11% y/y lower. As expected merchandise account only confirmed negative monthly trade balance figures with deficit reaching EUR 2.7bn (+18% y/y). Exports accelerated with respect to 2Q growing 13% y/y, while imports maintained rather strong 16% y/y pace therefore imbalanced widened further. Traditionally service account in 3Q recorded strong surplus given the tourist season related inflows, thus surplus amounted for EUR 4.6bn or 6% y/y higher being supported by slightly better than expected inflows side (+8% y/y). Income account performance also expectedly showed signs of deterioration (EUR 262mn deficit) as outflows recorded 21% y/y increase triggered by higher cost of debt repayments and profit repatriation activity. Current transfers remained flat posting EUR 259mn surplus and covering for the income account deficit. 1-3Q08 current account deficit (EUR 2.5bn) widening by 88% y/y confirmed widening external imbalances. 4Q08 is not expected to bring significant changes as we anticipate continuation of pressures on the merchandise account, thus overall we leave our 2008e C/A practically unchanged at 11% of GDP. In 2009 we expect that pressure on the merchandise account would ease given the deteriorating domestic demand and favorable oil prices trends, though exports dynamics would also come under increased pressure given the unfavorable international environment development. Current account deficit narrowing would be to great extent dependant on the services sector performance as at present uncertainties related with tourist sector performance in 2009 remain high. Overall we see C/A deficit hopefully entering single-digit region again.

    On the financing side 4Q MA FDI coverage of current account deficit (59%) continued to decline given the 59% y/y FDI inflows decline in 3Q. Debt creating financing also traditionally declined in 3Q by close to EUR 700mn. 4Q balance of payments is expected to bring intensified FDI inflows given the Hungarian MOL acquiring additional stake in national oil company INA. Also given declining deposit base in course of 4Q banking sector debt creating activity intensified thus 4Q financing side would look quite comfortable. Still 2009 brings some uncertainties as FDI inflows are expected to further weaken. Also debt creating financing is expected to be affected by the constrained access of the corporate sector to the international markets and tighter lending policies. Hence financing significant current account gap would be challenging and FX reserves stock would come under pressure with CNB pursuing stable exchange rate target. reserves

    Published on  Fri, Jan 2 2009, 14:11 GMT

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    Croatia: 3Q GDP

    Tue, Dec 30 2008, 16:25 GMT
    by Alen Kovac

    Erste Bank der oesterreichischen Sparkassen AG


    GDP growth moderated to 1.6% y/y in 3Q08

    3Q GDP data showed expected moderation of economic activity posting 1.6% y/y growth , thus being slightly below our expectations (ESBe: 1.8% y/y) and presenting lowest figure since 4Q00. More detailed look at the numbers offers relatively little surprise. As monthly frequency indicators were suggesting private consumption growth decelerated significantly (+0.4% y/y vs. 2.2% y/y in 2Q) affected by peaking inflation pressures in 3Q, unfavorable real wages performance, deteriorating consumer confidence and moderating credit growth. On the other hand fixed capital formation pacing at 6.6% y/y remained growth supportive, though being slightly below our expectations given still strong construction sector activity and also solid capital goods imports dynamics. Public consumption also moderated significantly growing 1.3% y/y in 3Q vs. 3.2% y/y in 2Q. On the other hand inventories changes supported GDP performance contributing roughly 2pp to the overall GDP figure. Net exports contribution expectedly remained negative (-2.7pp) given only moderated growth on the exports side (+1.7% y/y) and ongoing pressures on the imports (+6.3% y/y) side as suggested by monthly trade balance figures. Economic performance is expected to further slowdown in 4Q given the continuation of rather poor private consumption trends, moderation of investment activity and unfavorable international developments affecting external demand. Therefore we see FY08 GDP growth rate moderating towards 2.5-3% region.

    Published on  Tue, Dec 30 2008, 16:25 GMT

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    Slovakia: November CPI Inflation

    Thu, Dec 11 2008, 10:39 GMT
    by Mária Valachyová

    Erste Bank der oesterreichischen Sparkassen AG


    CPI continued declining in November, albeit at slower pace than expected

    - November CPI inflation slowed down from 5.1% y/y to 4.9% y/y, which was slightly above our and market forecasts (or estimate was 4.8%, market's 4.7%). Inflation continues in a declining tendency mainly because food prices do not increase in such extent as in the last year.

    - On a monthly basis, prices grew by 0.2% in November, due to increase in the prices of tobacco (by 7% as we expected) and increase in imputed rents, which slightly outpaced our expectations (the equivalent of homeowners rent increased by 2.7% versus our estimate at 2.0%). Positive impact on inflation had declining fuel prices (-9.2% m/m) and a slight decline in food prices.

    - Higher excise tax on tobacco will likely show up also in December inflation figures (we expect further growth by 5%). In contrary, prices of fuels will again have anti-inflationary impact (we expect another fall by 9%). December might see another increase in imputed rents. Nevertheless, inflation will likely continue gradually declining in coming months. We expect inflation to stay below 4.5% at the beginning of next year (and HICP to stay below 4% y/y).

    - Based on today's figure, we expect that harmonized inflation might reach 0.1% m/m in November, which would translate into an annual growth of 3.8-3.9% (after 4.2% in October).

    Published on  Thu, Dec 11 2008, 10:39 GMT

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    Hungary: CPI inflation − November

    Thu, Dec 11 2008, 10:32 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    CPI slowed to 4.2% y/y in November

    Consumer prices declined 0.2% m/m in November. Thus, the 12-month CPI inflation rate further slowed to 4.2% (from the 5.1% published for October). The figures surprised on the downside, as the market consensus for the 12 month rate was 4.6-4.8%. According to CSO’s comment, the 8.6% m/m decline in fuel prices pushed the headline index down by 0.5 percentage points. Prices of food were up just 0.1% compared to October. Thus, food and fuel prices developments as well as the favorable base effect have mostly contributed to the bigger than expected drop in the headline CPI. The only price increasing factor was that the 7.7% m/m increase in gas prices was accounted for in the November statistics, thus household energy prices rose 2.1% m/m. And last but not least, regarding question marks around inflation expectations, it seems as favorable that prices of services decreased by 0.3% m/m in November, after stagnation, seen October.

    The seasonally-adjusted core inflation rose 0.1% m/m. Thus, the 12-month core rate also slowed significantly, to 4.1%, from its October level of 4.6% y/y. We expect the strong disinflation process to continue in the coming months, which suggests the continuation of rate cuts. One must note however that presently, instead of the inflation prospects, the financial stability is the key factor in rate decisions. Nevertheless, we expect the CB to carry out 50bp rate reduction on December 22.

    Published on  Thu, Dec 11 2008, 10:32 GMT

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    Hungary: GDMA issue plan

    Wed, Dec 10 2008, 17:52 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    GDMA plans to cut the net forint denominated bond issuance by HUF 535bn next year

    This afternoon, the Government Debt Management Agency (GDMA) held a press conference on the 2009 issue planning. According to GDMA, the net financing needs of the state will amount to HUF 832.7bn next year, while the net issuance will be HUF 845bn. All of the net issuance will be denominated in FX, but there will be no FX bond issuance. Instead, the agency plans to use HUF 1,430bn worth of funds from the IMF/EU/World Bank loan. The agency wants mainly to use the loan granted by the European Commission, as in case of the EC sources, they have to handle only the EURHUF exchange rate risk.

    At the same time, there will be significant reduction in the forint-denominated bond supply, as the GDMA plans to issue HUF 535bn less forint government bonds in 2009 than expires. As for the net issuance of T-bills, that would be close to zero next year. The agency would not restart regular bond auctions in 1Q09; instead, they are going to hold them occasionally. They indicated, however, that if the situation on (global) financial markets improves faster, they are ready to shift from these non-market type financing.

    As for the gross issuance figures, the total gross issuance will be HUF 6,467bn in 2009, within which 75% will be forint-denominated.

    Assessment: the announced huge drop in the issuance of forint papers suggests fall in yields next year. However, the overall market sentiment and risk appetite will remain a crucial factor in the expected improvement.

    Published on  Wed, Dec 10 2008, 17:52 GMT

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    Slovakia: 3Q GDP growth

    Thu, Dec 4 2008, 14:48 GMT
    by Mária Valachyová

    Erste Bank der oesterreichischen Sparkassen AG


    Strong economic growth in 3Q08 was driven by household consumption and investments

    - Statistical Office revised its 3Q08 real GDP growth a notch down to 7.0% y/y from preliminary estimate at 7.1% y/y.

    - The growth structure was similar to the one from the second quarter, when the main driver was domestic demand - both household consumption and investments, which posted yet another strong increase.

    - Household consumption increased by real 6.0% y/y in 3Q owing to the strong employment gains on domestic market (according to ILO methodology the employment increased by 4.5% y/y while unemployment rate declined to 9.0%). Real wage growth increased by 3.5% y/y, which was slightly above our forecasts. However, the wage growth still lagged productivity gains.

    - Fixed investments rose by real 7.3% y/y (YTD the investments increased by almost 9% y/y), which is positive for the future growth prospects. We expect the investment growth to gradually decelerate over coming quarters due to financial crises and slowdown in foreign demand.

    - Net exports contributed positively to the growth, albeit by a small amount (real exports increased by 2.7% y/y outpacing the increase in imports of goods and services standing at 2.0%).

    - Outlook: the growth rate in the final quarter of 2008 will slowdown sharply due to one-off basis effect (in 4Q07 the real GDP growth reached exceptional 14.3% y/y, thanks to pre-stocking by cigarettes ahead of the hike in excise taxes). This year, pre-stocking will repeat, nevertheless, the higher taxes are valid since February, so we expect majority of the pre-stocking to occur in January 2009. Next year, we expect weak foreign demand and financial crises to have bigger impact on Slovak economy when we anticipate the growth rate at around 4.5-5.0% as compared to anticipated 7% for this year.

    Published on  Thu, Dec 4 2008, 14:48 GMT

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    Hungary: Central bank cut the base rate by 50bp to 11.00%

    Tue, Nov 25 2008, 07:52 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    The monetary council surprised the markets today, by cutting the base rate by 50bp, to 11.00%. After the emergency 300bp rate hike (from 8.50% to 11.50%) carried out in October, when protecting the forint from further falls became the top priority for the central bank, the most important question was when the central bank would be able to “take back” from this. Although the fact, that the fundamental state of the county suggested the start of rate cuts sooner or later, we – in line with the market consensus - did not expect any rate change for today, given the uncertainties around the forint exchange rate and fast changes in global risk appetite. The statement of the monetary council says however that the agreement with the IMF and the upcoming budget adjustment measures have reduced the risks to the financing of the country's external debt, which has increased the maneuvering room of the monetary policy. Therefore, the council decided to cut the base rate.

    At the press conference Governor Simor said that that they had tried to match two different factors: on the one hand, the base rate could be cut, because of the disinflation, on the other hand, whether the rate cut was possible from the point of view of the financial stability. There were three options discussed: a 50bp cut, keeping the base rate on hold and a 100bp cut. The decision of the 50bp rate reduction had a strong majority.

    The statement also said that interest rates could be cut further if the risks around capital inflows and the stability of the financial intermediary system continued to diminish. This suggests that rate cuts should continue and another 50bp rate reduction could come even next month, but this will strongly depend on the general state of capital markets.

    In the November Quarterly Report on Inflation, the forecast for the 2009 average inflation was cut to 3.1-3.4% y/y, from the 4.1% y/y, projected in August. What is more spectacular is that the prediction for the 2010 average inflation was cut to 1,5-1,9%, from 3% y/y. Thus, according to the new forecasts on the horizon relevant for monetary policy, the bank will undershoot the 3% inflation target, which was the main reason for today’s loosening.

    As for the economic growth prospects, it’s not too favorable that the bank’s staff expects a GDP decline of 0.2-1.7% y/y for 2009. In the previous (August) report, the expectation for the 2009 GDP growth was 2.6% y/y. For 2010, they see the GDP growth rate in the range of 0.5%-2%, which does not suggest a strong recovery after the 2009 bad year. The downward correction in GDP was due to the deterioration of the external growth outlook, investors' lower willingness to take risks, declining liquidity and deterioration of domestic credit conditions.

    Market reaction: the forint has reacted with appreciation to the rate decision, approaching the level of 260 against the EUR.

    Published on  Tue, Nov 25 2008, 07:52 GMT

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    Croatia: October CPI & 2Q LFS Unemployment

    Fri, Nov 14 2008, 14:08 GMT
    by Alen Kovac

    Erste Bank der oesterreichischen Sparkassen AG


    2Q LFS unemployment rate declined to 7.9%

    The 2Q labor force survey showed solid labor market performance, as the unemployment rate declined a robust 2.1pp q/q to 7.9%, down 1.2pp y/y. The activity rate increased with respect to 1Q, by 0.3pp to 48.6%, while the employment rate increased by 1.3pp to 44.8% (-26ths unemployed). The figures were mainly in line with expectations, as the official monthly figures supported strong labor market trends. Given the seasonal pattern, 3Q should show some further improvement, while 4Q brings a trend reversal. The present dynamics support a <9% year-end unemployment rate.

    CPI slowed to 5.9% y/y in October

    October consumer price inflation came in better than expected; on the monthly level, inflation declined by 0.1% (ESBe +0.2m/m), thus falling below 6% y/y. Food prices were neutral m/m, while footwear and clothing prices increased by 3.4% m/m, as expected. The continuation of favorable oil price developments on global markets translated into lower retail gasoline prices, contributing to the inflation slowdown, as transportation prices declined 2.8% m/m. The inflation outlook remains favorable, as pressures from commodity prices have evaporated and, as the strong base effect unwinds, inflation is expected to slow down in the coming months, eventually going below the 5% threshold at yearend. In inflationary terms, 2009 looks comfortable, as average inflation is expected to be substantially lower than in 2008, but remain sensitive to a resurgence of supply-side pressures and uncertainties regarding administrative price hikes.

    Published on  Fri, Nov 14 2008, 14:08 GMT

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    Slovakia: GDP flash for 3Q08

    Fri, Nov 14 2008, 10:19 GMT
    by Mária Valachyová

    Erste Bank der oesterreichischen Sparkassen AG


    GDP growth reached 7.1% in line with expectations

    - Today, the Slovak Statistical Office released a flash GDP estimate for the 3Q08. The annual economic growth reached 7.1%, meeting the market and our expectations. After seasonal adjustment the growth stood at 7.6%. The final figure will be released on December 4; however, the second estimate usually differs only marginally from the preliminary one.

    - The growth structure will be released along with the final figure at the beginning of December; we expect that both domestic and foreign demand contributed positively to the growth. As compared to the previous quarter, when GDP growth reached 7.6%, we expect smaller contribution from the stock buildings.

    - Labor market continued to evolve very favorably when the employment increased by 3.1 % y/y (in domestic concept). After strong employment gains during last year and the first half of 2008, we already anticipated slowdown to around 2%.

    - Going ahead, we expect deceleration of the growth rate in the final quarter, mainly due to strong base effect from 4Q07 (caused by a pre-stocking of cigarettes ahead of the tax hike). We keep our 2008 annual growth forecast at 7.4%. The next year, we will likely see more visible slowdown to around 4.5-5.0%, due to worsened external environment and expected lower investment growth due to financial crises. Nevertheless, the Slovak growth should remain one of the strongest in the EU.

    Published on  Fri, Nov 14 2008, 10:19 GMT

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    Hungary: GDP slowed to 0.8% y/y in 3Q08

    Fri, Nov 14 2008, 09:23 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    According to the CSO’s flash estimate, GDP rose just 0.8% y/y in the third quarter of 2008 - remaining well below expectations - after the 2% y/y seen in 2Q08. Taking the calendar effect into consideration, the economy grew by just 0.7% y/y in 3Q08. Compared to the previous quarter, the GDP declined 0.1%. The CSO indicated that the performance of the manufacturing industry and the construction industry pulled down the figure, while exports slowed. The breakdown of the figures will be available on December 9.

    The higher than expected slowdown in GDP growth is very negative, as earlier we had expected the economy to grow below 1% y/y just in the last quarter of 2008. Latest data show that unfavorable processes seen in the Euro area has negatively affected the performance of the Hungarian economy already in July-September, earlier than expected. The good performance of agriculture seems not to have been able to offset the poor industrial and export performance. As for the GDP growth prospects, the outlook is not too bright. Apart from poor growth outlook of global economy, tighter credit conditions and the drop in real wages, expected for 2009 do not suggest any revival of domestic use in the coming quarters.

    Published on  Fri, Nov 14 2008, 09:23 GMT

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    Slovakia: October CPI Inflation

    Wed, Nov 12 2008, 10:13 GMT
    by Michal Musâk

    Erste Bank der oesterreichischen Sparkassen AG


    As expected, CPI inflation slowed down in October

    - October CPI inflation slowed down from 5.4% y/y to 5.1% y/y, in line with our estimate (the market expected 5.0-5.1%). The main reason for slowdown was the base effect, as food prices grew significantly this time last year, while they stagnated this October.

    - On a monthly basis, prices grew by 0.4% in October. Favourable impacts included decline of fuel prices (by more than 3 %, while even more significant fall should be seen in November). Also, we expected slight growth of food prices instead of stagnation.

    - At the same time, 10 months since excise tax hike the stock of last year's cheaper cigarettes is running out and long-anticipated impact of higher cigarette prices was finally seen in inflation. So far, only a smaller part of the expected impact made its way into inflation and we expect it to affect inflation in the upcoming months. Imputed rents (fund of repairs in residential housing) again supported inflation, while heat prices grew by 2.5% m/m. Prices of some services also exceeded expectations (especially prices related to education, while prices in hotels and restaurants and in healthcare also grow; harmonized inflation will provide a more detail picture once it is released).

    - Based on today's figure, we expect that harmonized inflation might reach 0.3% m/m in October, which would translate into an annual growth of 4.1-4.2% (after 4.5% in September).

    - In the upcoming months, we expect slowdown of CPI inflation to below 5% by the year-end (and HICP inflation to below 4% y/y). In the recent months, oil prices declined significantly, which translated into fuel price decline and also decreased the probability that energy prices will be hiked (although we still see non-zero risk, that gas prices for household will grow in January). A hardly-predictable item is imputed rents (it is not in the HICP basket).

    Published on  Wed, Nov 12 2008, 10:13 GMT

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    Hungary: CPI inflation − October

    Tue, Nov 11 2008, 10:01 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    CPI slowed to 5.1% y/y in October

    Consumer prices rose 0.2% y/y in October. Thus, the 12-month CPI inflation rate further slowed to 5.1% (from the 5.7% published for September). The y/y figure proved to be lower than both my expectation of 5.3% and the market consensus of 5.2%. Prices of food were up 0.3% compared to September, within which seasonal food prices increased by 3.5% m/m. As expected, prices of clothes increased substantially, by 4.9% m/m, based on the seasonality. Fuel prices dropped by 3.2% m/m. Regarding question marks around possible second round effects, it seems as favorable that prices of services remained unchanged in October, after 0.8% m/m drop, seen in September. The seasonally-adjusted core inflation rose 0.2% m/m. Thus, the 12-month core rate also slowed significantly, to 4.6%, from its September level of 5% y/y. We expect the disinflation process to continue in the coming months, as the base effect will remain supportive. As for 2009, despite the somewhat weaker forint, poor economic growth prospects could suggest further disinflation process.

    For fundamental reasons, latest CPI inflation data suggest starting of rate cuts, after the 300bp emergency rate hike in October. However, such a step is unlikely to be carried out in the near period, given the fragile forint exchange rate and still extremely high risk premia on forint assets.

    Market reaction: neutral

    Published on  Tue, Nov 11 2008, 10:01 GMT

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    Hungary: Fitch rating downgrade

    Mon, Nov 10 2008, 11:41 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Fitch cut Hungary’s current rating from BBB+ to BBB

    After cutting the rating outlook from stable to negative in the middle of October, this morning the Fitch credit rating agency announced that they cut the rating of Hungary’s sovereign debt from BBB+ to BBB, with stable outlook. The agency said that in the case of Hungary “the downgrade reflects the severity of the recession and post-crisis correction to macroeconomic imbalances and associated risks to the public finances and from foreign currency mismatches in the private sector," However, the IMF-led package of support has largely removed external financing and liquidity risks, supporting Fitch's stable outlook.

    After today’s Fitch downgrade, Hungary’s A3 rating at the Moody’s has again become two notches higher than the Fitch’s new rating of BBB.

    As for the third credit rating agency, Hungary’s rating stands at BBB+, with negative outlook at the S&P. Thus, similar step from their side can not be excluded in the near period.

    Market reaction: the forint weakened, stands now closer to the level of 270 EURHUF.

    Published on  Mon, Nov 10 2008, 11:41 GMT

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    Hungary: Rating downgrade

    Fri, Nov 7 2008, 15:34 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Moody’s cut Hungary’s current rating from A2 to A3

    This afternoon, Moody’s credit rating agency announced that they cut Hungary's current rating from A2 to A3, with negative outlook. So far, the Moody’s has not been as active in changing the ratings and outlooks as the other two credit rating agencies (Fitch and the S&P). Thus, the current A3 rating is still one notch higher than the BBB+ ratings of the Fitch and the S&P. Taking the earlier two-notch difference into consideration, today’s step should not cause big surprises on the markets, although it has arrived at a very bad time.

    The agency said that many years, Hungary had had somewhat weaker macroeconomic and debt indicators than those of its rating peers. They added, however, that positioning of the rating in the mid-A category reflected the prospective benefits of further EU integration.

    Market reaction: immediately negative, the forint weakened to 270 EUR/HUF, then it has corrected to the levels seen before the announcement.

    Published on  Fri, Nov 7 2008, 15:34 GMT

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    Hungary: Size of the IMF standby loan

    Wed, Oct 29 2008, 10:33 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Size of the standby loan amounts to USD 25.1bn

    It has been announced this morning that the IMF, the EU and World Bank would provide a financing package for Hungary. The size of loans will amount to USD 25.1bn, within which the IMF will provide USD 15.7bn, in a frame of a 17-month standby arrangement. The size of the package proved to be significantly higher than expected earlier, helping to restore the confidence on domestic markets. The arrangement and the enormous size of the package could strongly mitigate worries, regarding the country’s ability to repay its debt maturing in the coming 12 months. Market reaction: very positive, the forint has strongly appreciated after the announcement, approaching the level of 255 against the EUR.

    Published on  Wed, Oct 29 2008, 10:33 GMT

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    Hungary: Budget, IMF loans

    Tue, Oct 28 2008, 09:36 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Government adjusts the budget for a potential recessionary scenario.

    The Finance Minister Veres said this morning that the government would modify its already revised 2009 budget bill to adjust for a potential recessionary scenario (1% drop in GDP). He added, however, that the government does not plan to submit a completely new budget to the Parliament. Please note that the government had already submitted a new 2009 budget draft to Parliament in the middle of October, in which the 2009 GDP growth forecast had been cut to 1.2% y/y, from the earlier 3% y/y. Another possible adjustment of the budget could be in connection with the ongoing talks with the IMF about a standby loan for Hungary. Rumors say that the institute wants to see HUF 300bn additional cuts on the expenditure side of the budget next year. These cuts may affect public sector wages and bonus payments and pensions. The 13th month wages in the public sector would be cancelled, while the amount of money planned to be spent on 13th month pensions would be cut by 50%. However, there have no been official comments on these plans. Anyway, if the 300bn reduction of expenditures really takes place next year, this could result in a budget deficit of around 2.2% of GDP, lower than the currently planned 2.9% of GDP.

    Market reaction: based on the more favorable external market environment and on domestic news suggesting even stricter control on public finances next year, the forint has strengthened, to below the 265 level against the EUR this morning.

    Published on  Tue, Oct 28 2008, 09:36 GMT

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    Hungary: IMF announcement

    Mon, Oct 20 2008, 12:11 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    IMF announced agreement with Hungary

    Late Sunday, the IMF announced that it had reached a broad agreement with the Hungarian authorities on a set of policies to strengthen the stability of the Hungarian economy. The IMF added that participants in the program will include the IMF, the EU, and some individual European governments, together with regional and other multilateral institutions. The IMF indicated that “a substantial financing package“ would be announced in the next few days. The program is not finalized yet, and the most important detail, i.e. the volume of the package is not known yet.

    The assistance from the IMF will be received in form of a stand-buy credit.

    Based on the fact that the volume of the package in Ukraine is equivalent to 800% of country’s quota in the Fund, and Hungary's current IMF quota is around USD 1.55bn, the same ratio could mean USD 12.4mn (around EUR 10bn) for Hungary. This could be the reason why current market rumors also talk about an amount of EUR 10bn. Taking Hungary’s international reserves amounting to EUR 17bn, the EUR 5bn credit facility from the ECB and the estimated IMF support into consideration, these altogether should mean EUR 32bn, which fully covers the debt of the country, maturing in the coming 12 months.

    The announcement with the Fund should help to restore the confidence on domestic markets. Anyway, the forint has been able to strengthen around 1% since today’s opening. Improvement on global markets, however, still seems inevitable for a more spectacular recovery of the forint.

    Published on  Mon, Oct 20 2008, 12:11 GMT

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    Hungary: Rating outlook

    Fri, Oct 17 2008, 12:27 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Fitch cut Hungary’s current rating outlook from stable to negative

    This afternoon, the Fitch credit rating agency announced that they cut Hungary's current rating outlook to negative from stable as a result of increased credit risk stemming from the world financial crisis. However, they left the foreign currency rating unchanged at BBB+.

    According to the agency, shocks from global financial turbulences and the likelihood of recession in the Euro area have increased downside credit risk, given Hungary's high external debt stock, wide current account deficit and large external financing requirement.

    Market reaction: negative, the forint again weakened above 270 EUR/HUF.

    Published on  Fri, Oct 17 2008, 12:27 GMT

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    Hungary: Nominal wages, August 2008

    Fri, Oct 17 2008, 09:07 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Nominal wage growth slowed in August

    According to the CSO figures, gross average wages in the economy increased by 7.2% y/y in August (after 7.8% y/y, seen in July, within which the private sector gross wage growth slowed to 7.7% y/y, from 8.3% y/y. Regular (ex bonuses) gross wage growth in the private sector - which is mostly monitored by the central bank – also slowed to 7.7% y/y (from 9.3% y/y, published for July). The above figure could be reassuring, from the point of view of the monetary policy. But taking the current market environment into consideration, nominal wage figures should have hardly any significance at the coming rate decision. Base rate is expected to remain on hold (8.50%) next Monday.

    Published on  Fri, Oct 17 2008, 09:07 GMT

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    Hungary: Central bank measures to boost the liquidity on the FI market

    Thu, Oct 16 2008, 15:46 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Liquidity measures of the central bank

    As the yields on the Hungarian FI market have remained at unrealistic, fundamentally unjustified levels, due to the lack of demand for papers, Vice Governor of the Central Bank Júlia Király said yesterday that the bank was working on a complex package in order to boost liquidity into the dried-up market. The first step of this package was announced this afternoon after the extraordinary meeting of the monetary council. According to this announcement, central bank signed a deal with primary bond dealers to boost market liquidity. The point of the deal is that the bank will hold auctions to buy government securities from primary dealers. The first auction will take place this week. Primary dealers, however, have to provide continuous bid and offer prices at BSE for all publicly issued forint-denominated government securities, with residual maturities of more than 90 days, for a face value of at least HUF 100mn and they will have to increase their holdings of Hungarian government securities. (Please note that primary dealers practically had stopped quoting government bonds in the last couple of days, due to the lack of confidence). The bid/ask spreads for papers up to one-year in maturity may not be wider than 50bp, while that for papers with maturity longer than one year may not be wider than 30bp. (Spreads widened to over 100bp in the recent period). The agreement will last until the end of this year.

    In addition, the CB has announced today the introduction of two new lending facilities. (1) A weekly tender for twoweek, fixed-rate secured loans, for an unlimited amount. (2). A regular tender for six-month, variable-rate secured loans, for a pre-specified amount. The details of these lending facilities will be announced after the monetary meeting, scheduled for October 20.

    Earlier the day the CB announced that they had signed a deal with the ECB on repurchase transactions which will allow the central bank to borrow up to EUR 5bn, reducing the risk of a lack of euro liquidity in the local banking sector. The deal can be seen as support from the side of the ECB for the CB instruments of euro liquidity provision.

    At the moment, it’s hard to assess the possible impacts of these measures. As for the government bond auctions, the key questions is at what prices and in what volume the CB will buy the papers from the primary dealers. If these auctions are to be successful, these may help to restore the confidence on the FI market, but at the moment these seem to take some time. As for the ECB support, it could ease fears on the markets that domestic banks will have to stop FX-based lending, which could have very negative impacts on the GDP growth.

    Published on  Thu, Oct 16 2008, 15:46 GMT

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    Hungary: Budget Balance – September

    Tue, Oct 7 2008, 16:49 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Finance Ministry published a budget deficit of HUF 58.4bn for September 2008

    Finance Ministry published a budget deficit of HUF 58.4bn for September, taking the cumulative deficit for the first nine months of the year to HUF 731bn, 70.8% of latest full-year CF-based deficit forecast. The September monthly deficit figure proved to be lower than the ministry’s preliminary forecast of HUF 80.5bn, mainly due to the lower than predicted deficit of the central state budget.

    The details of the September budget processes will be released on October 21. The September actual figures have again reinforced that budget processes will remain on track this year. It is very likely that the latest 2008 deficit goal of 3.8% of GDP will again be undershot. (Last week, the 2007 budget gap was revised downwards to 5% of GDP, from 5.5% of GDP).

    Market reaction: neutral.

    Published on  Tue, Oct 7 2008, 16:49 GMT

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    Croatia: 2Q Balance of Payments

    Wed, Oct 1 2008, 13:14 GMT
    by Alen Kovac

    Erste Bank der oesterreichischen Sparkassen AG


    2Q C/A deficit up 32% y/y

    chart 1

    As expected, the current account maintained its negative trend in 2Q08, with the deficit reaching EUR 1.8bn, a robust increase of 32% y/y. As usual, the strongest pressure came from the merchandise account, where the deficit widened by 23% y/y, supported by the sluggish 2Q monthly trade balance figures. Hence, exports increased by 7% y/y, clearly outpaced by the 15% y/y import growth rate. The trade balance outlook remains rather poor, as exports will have a hard time overcoming pressures from deteriorating competitiveness and the worsening regional economic prospects. Imports remain under pressure from more expensive energy and food imports and rather robust investment activity. Hence, we expect the trade balance deficit to widen to close to 27% of GDP. The service account, on the other hand, performed well, managing to offset approx. 50% of the trade balance deficit increase and recording a 19% y/y higher surplus (EUR 1.8bn). Service exports grew by a solid 16%, supported by both tourist sector activity and other sector exports. Coming to the income account deficit, the increase of 24% y/y (EUR 729mn) was slightly above expectations, although the deterioration came as no surprise. Outflows increased by 19%, given the higher cost of debt servicing and dividend outflows, while inflows were up 9% y/y. The surplus on the current transfers account increased by 5% y/y, thus putting a stop to the moderating trend from 1Q08.

    On the financing side, the FDI performance has been relatively steady, as FDI inflows (EUR 934mn) were only 6% y/y lower and FDI import coverage stood at around 50%, while the rolling 4Q coverage is 74%. Also, pressure on foreign debt-creating financing continued, as other investment inflows amounted to EUR 1,042mn, hence doubling in the first half of 2008. Despite the widening of the C/A deficit, financing remains rather comfortable and we do not anticipate a significant change in this trend. As far as the current account is concerned, 2008 is expected to bring a significant widening of the deficit, which is expected to exceed 10% of GDP


    Published on  Wed, Oct 1 2008, 13:14 GMT

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    Hungary: C/A balance, 2Q08

    Tue, Sep 30 2008, 10:24 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    C/A deficit amounted to EUR 1.838bn in 2Q08

    The central bank has published the 2Q08 C/A balance figures this morning. The C/A deficit amounted to EUR 1.838bn in 2Q08, exceeding both our expectation and the market consensus of EUR 1.4bn. At the same time, due to methodological changes, the bank significantly revised upwards the 1Q C/A deficit from EUR 1.16bn to EUR 1.647bn and the 2007 FY deficit to EUR 6.51bn from just EUR 5.036bn. The bank and the CSO said in a statement that they revised foreign trade figures in the national accounts and the current account to exclude companies which are not registered in Hungary but have to report value-added tax in Hungary. This has led to widened deficit figures for the period back to 2004. The interpretation of these changes from the point of view of the economic balance situation needs a bit more time.

    The surplus on the trade and services balance was EUR 588mn, after EUR 448mn, seen in 1Q08. The trade surplus of goods decreased to EUR 287mn, from EUR 375mn, published for the first quarter, while the surplus on services remained broadly unchanged.

    As for the financing side of the balance, after the surplus seen in the first quarter, non-debt creating financing slipped into the negative territory in 2Q, amounting to EUR -1.018bn. Thus, the country again proved to be more reliant on debt creating financing.

    Published on  Tue, Sep 30 2008, 10:24 GMT

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    Hungary: NBH rate decision

    Mon, Sep 29 2008, 14:01 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Central bank kept the base rate on hold at 8.50%

    At its today monetary meeting, the monetary council kept the base rate on hold at 8.50%. The decision did not come as a surprise, expectations for the outcome of this meeting had been unanimous. The main points of the statement of the monetary council are as follows:

    • • the Hungarian economy is characterized by modest growth and a slow decline in inflation

    • • uncertainties stemming from global trends have significantly increased

    • • the current negative output gap could help the disinflation process

    • • wage formation in the private sector is still above the level which could be justified by the inflation goal and the improvement in productivity.

    As for the current global turmoil, according to the council, it does not affect directly the stability of the banking system in Hungary. The global slowdown, however, could negatively affect external demand (mainly from the Euro area), which could have further negative impacts on domestic growth prospects. Thus, downside risks to GDP growth have increased in the recent period and any recovery could come just in longer term. Finally, the statement repeated what had earlier been indicated by several council members; that before making any easing moves the council has to be certain upside risks to inflation have been significantly reduced.

    At the press conference, governor Simor said that the council had discussed the options of hold and a 25bp rate reduction. In the end, the hold decision got overwhelming majority.

    Summarizing the above, the bank has maintained its cautious, wait and see stance, as it had been expected. We stick to our prediction that the base rate will remain on hold for the remainder of this year. Next year, however, should bring rate cuts, due to the improvement on the inflation front.

    Published on  Mon, Sep 29 2008, 14:01 GMT

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    Hungary: NBH rate decision

    Mon, Sep 29 2008, 13:44 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Central bank kept the base rate on hold at 8.50%

    At its today monetary meeting, the monetary council kept the base rate on hold at 8.50%. The decision did not come as a surprise. The detailed statement of the council will be available at 14.30, as usual.

    Published on  Mon, Sep 29 2008, 13:44 GMT

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    Croatia: August 08 CPI Inflation

    Mon, Sep 15 2008, 14:27 GMT
    by Alen Kovac

    Erste Bank der oesterreichischen Sparkassen AG


    CPI moderated to 7.4% y/y

    August brought expected inflation slowdown, still surprising slightly on the positive side. On the monthly side pressures slowed down as priced declined by 0.3%. Fuel prices decline have been behind moderating pressures as transportation prices declined by 3.4% m/m and housing, water, electricity, gas other fuels prices lowered 0.9% m/m. On top of that clothing and footwear prices still supported by seasonal sales effect eased 1.3% m/m. Food and nonalcoholic beverages remained under some pressure accelerating 0.4% m/m, while also recreation and culture prices (+1.7% m/m) due to newspaper prices hikes have put some pressure. In the upcoming months we see declining likelihood of negative pressures from the supply-side and are expecting that pressures should to some extent moderate further. Hence, we stick continue to stick with current average CPI forecast of 6.6% for 2008 and continue to see inflation moderating to below 6% threshold towards the year-end as strong base effect would unwind. We continue to see CNB adopting wait and see strategy in the upcoming months in order to see inflationary trends. Currently we see decreasing likelihood of further monetary tightening as supply-side developments are giving some positive signs, while also stronger exchange rate should offset proportion of inflationary pressures. Finally, we do not expect significant reaction from the markets as investors would most likely want see some additional evidence of inflation slowdown given the currently negative real interest rates on the bond market.

    Published on  Mon, Sep 15 2008, 14:27 GMT

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    Slovakia: August CPI Inflation

    Wed, Sep 10 2008, 08:59 GMT
    by Michal Musâk

    Erste Bank der oesterreichischen Sparkassen AG


    CPI inflation accelerated in August due to imputed rents

    • - Consumer inflation accelerated in August to 5.0% y/y (up from 4.8% in July), exceeding our and market expectations. We assumed that the headline inflation could decline for the first time in a year to 4.7% y/y (this view was also shared by the market). However, a sharp increase in imputed rents kept inflation on its upward path. As expected, food prices declined thanks to summer season, as new crop is making its way into shops (especially prices of vegetables and fruits usually decline during the summer months). Stocks of last year's cheaper cigarettes have not been depleted yet, as inflation figures still lack the effect of higher excise taxes. The more expensive cigarettes will therefore show up in the CPI figures in the coming months. 

    • - Imputed rents went up by 4.1% on the month. When calculating imputed rents, the Slovak Statistical Office uses the payments to the funds of repairs. Therefore, it is not possible to say whether increase was related to higher prices or whether it was due to larger investments, such as to enhance energy efficiency of flats (theoretically, the latter should not be included in inflation figures, as they decrease future energy costs). 

    • - As tobacco prices did not increase and imputed rents are not included in harmonised inflation, we expect the August HICP to decline by 0.1-0.2% on the month (it will be released on September 16). Annual harmonised inflation should reach 4.3-4.4 % in August (instead of our pre-CPI forecast of 4.4-4.5%).

    •   -Today's figure led to increase of our year-end CPI inflation estimate from 5.0 % to 5.2%. Imputed rents still pose a risk to the prognosis. But the major uncertainty affecting the estimate continues to lie in energy prices, as the possible gas price hike may range between 0% sought by the government and nearly 20% demanded by the distributor. The difference in CPI inflation impact between these two scenarios is as much as 0.9pp (our working assumption expects 10% growth). Today's figures increased harmonized inflation outlook only slightly and we expect HICP inflation to reach 4.3-4.4 % in December.

    Published on  Wed, Sep 10 2008, 08:59 GMT

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    Hungary: Budget Balance − August

    Tue, Sep 9 2008, 17:00 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Finance Ministry published a budget deficit of HUF 91.2bn for August 2008

    The Finance Ministry published a budget deficit of HUF 91.2bn for August, taking the cumulative deficit for the first eight months of the year to HUF 672.5bn, 65.1% of latest full-year CF-based deficit forecast. The August monthly deficit figure was minimally lower than the ministry’s preliminary forecast of HUF 94.14bn. The details of the August budget processes will be released on September 17. The August actual figures have not really changed the outlook for the remainder of the year. Especially based on the favorable revenue trend, budget processes is to remain on track this year. The ministry is unlikely to change its ESA deficit forecast of 3.8% of GDP for 2008.

    Market reaction: neutral.

    Published on  Tue, Sep 9 2008, 17:00 GMT

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    Slovakia: 2Q08 GDP growth

    Wed, Sep 3 2008, 09:43 GMT
    by Mária Valachyová

    Erste Bank der oesterreichischen Sparkassen AG


    Economy grew by 7.6% in 2Q08, thanks to consumption and investments 



    • * Statistical Office confirmed 2Q08 GDP growth at 7.6% y/y, in line with the flash estimate.

    • * Similar to 1Q08, the economic growth was driven by domestic demand. Household consumption remained decisive but was not the only driver, as gross fixed investments contributed significantly to the growth as well, which is positive for the future economical prospects. More specifically, household consumption slowed down from 8.4% y/y in 1Q08 to 5.7% y/y in 2Q08, which diminishes the risk of demand inflation pressures. On the contrary, government spending growth has sped up to 8.9% y/y. Real wages (seasonally adjusted) rose annually by 4.8% and roughly equalled the real productivity growth. From the monetary policy point of view, it would be optimal if the wage growth was lower than productivity growth. However, the wage growth in 1H08 was affected by one-off adjustment of salaries in state administration at the beginning of the year instead of July (as it was a year ago). The wage growth rate should be back in line with productivity growth in the second half of 2008.
    • * Despite slowdown, household consumption growth remains solid as higher consumption was facilitated by the employment growth (by 2.9% y/y in the ESA-95 methodology) and the real wage growth at 4.8% y/y. 

    • * The growth of gross fixed investments accelerated to 9.6%, which - along with the inventory accumulation - contributed about 3pp to the overall growth (above our expectations). Similar to the 1Q08, net export did not add to the economic growth. Export of goods and services grew by 8.7% y/y in real terms, below our expectations and below the 9.0% import growth. We assume that the lower-than-expected export could be attributed to lower demand from the Eurozone. On the contrary, imports could have been affected by higher investment imports, as well as more expensive oil a import of strategic raw materials. 

    • * For 2008, we keep our GDP forecast at 7.6% (for comparison, Statistical Office expects full-year growth at 7.9% y/y), which means a slowdown from 10.4% in 2007. In the second half of this year, the growth structure should be more balanced in 3Q08, driven by both domestic and foreign demand.

    Published on  Wed, Sep 3 2008, 09:43 GMT

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    Hungary: Industrial output, June 2008

    Wed, Aug 6 2008, 16:50 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Industrial output dropped by 0.3% y/y

    The June industrial output figures, published this morning surprised on the downside. According to the CSO preliminary figures, both the working day adjusted and unadjusted industrial output figures showed a decline of 0.3% y/y in June. Compared to May, industrial output dropped by 1.6%. Some slowdown in the industrial performance had been expected, due to the poorer Eurozone growth prospects, as slower growth in the Euro-zone could reduce demand for exports from Hungary. However, the slip into the negative territory still came as a negative surprise, despite the high volatility of the monthly statistics.

    Market reaction: The technical correction in the forint, started yesterday has continued. The forint has extended its losses this morning, with the exchange rate against the euro approaching the 237 HUF/EUR level. Poor industrial output figures may have played some role in the weakening, however, the ongoing change in interest rate expectations could have more significant impact. As lower oil prices have improved the mid-term inflation outlook, the central bank is not expected to carry out any further interest rate hikes. Instead, markets started to cautiously price in rate cuts. With lower interest rate differential for the forint, the role of one of the most important fundamental supports for the stronger forint exchange rate could decrease in the mid run.

    Published on  Wed, Aug 6 2008, 16:50 GMT

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    Hungary: Nominal wages

    Thu, Jul 17 2008, 11:01 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Nominal wage increases slowed down in May

    According to the CSO, gross average wages in the economy increased by 9.6% y/y in May (after 10.6% y/y, seen in April), within which the private sector gross wage growth slowed to 8.5% y/y, from 10% y/y. Regular (ex bonuses) gross wage growth in the private sector - which is mostly monitored by the central bank – also slowed to 7.4% y/y (from 9.1% y/y, published for April), approaching the tolerance level of the central bank. Taking the fast appreciation of the forint exchange rate seen in the last couple of weeks into consideration, nominal wage figures should have lesser significance now in the coming rate decision. Figures however still could reinforce the current consensus that no rate hike is to be carried out at the next rate-setting monetary meeting.

    Published on  Thu, Jul 17 2008, 11:01 GMT

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    Croatia: June 08 CPI Inflation

    Tue, Jul 15 2008, 13:41 GMT
    by Alen Kovac

    Erste Bank der oesterreichischen Sparkassen AG


    CPI inflation surged to 7.6% y/y in June

    June CPI inflation came in slightly above our expectations (ESBe: 7.4%), adding 0.7% on the monthly basis and comfortably surpassing 7% on the annual level. The figures offered a few surprises in terms of structure. On the monthly level, pressure came from food and non-alcoholic beverages (+0.8% m/m), liquid fuel (+7.3% m/m) and transportation (+2.4% m/m), as expected. On top of that, seasonal recreation, culture and catering and accommodation services added to the pressure. Looking at the annual level, a few things have changed, as food and non-alcoholic beverage prices grew at a robust 13.1% y/y, followed by transportation prices at 11% y/y.

    In July, we see the CPI figure above the 8% level, as the CPI figures should be negatively affected by the electricity price hike and an adverse base effect. However, seasonally-affected prices of food and clothing/footwear should ease the pressure to some extent. Towards the year-end, we see the headline dropping to the 6% region, alongside a moderation of the pressure on the supply side and as the base effect unwinds. On average, we expect CPI inflation in the 6.5-7% region.

    Published on  Tue, Jul 15 2008, 13:41 GMT

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    Slovakia: June consumer inflation

    Thu, Jul 10 2008, 13:29 GMT
    by Mária Valachyová

    Erste Bank der oesterreichischen Sparkassen AG


    Inflation stagnated at 4.6% in June, driven by food and oil prices

    • Consumer inflation stayed at 4.6% y/y in June, meeting market expectations. We expected a notch lower figure at 4.5% y/y. As compared to May, the prices increased by 0.4%, fuelled mainly by food and oil prices. 

    • The key drivers - food and fuel prices - rose by 0.7% and 2.3% on the month, respectively, in line with our forecasts. Imputed rents, which increased by 0.7% m/m where the item, which caused the difference between our CPI estimate and the real figure. As the imputed rents are not included in harmonized inflation, we maintain our earlier estimate of June HICP at 4.2% y/y (hence, Slovakia should keep meeting the Maastricht inflation limit). 

    • Outlook: Consumer inflation should stay in range of 4.6-4.9% y/y in the second half of the year in our view (among up-side factors we reckon the prices of cigarettes and increase of energy prices in autumn, while the strong koruna should work as anti-inflationary tool). At the beginning of 2009, we expect consumer inflation to drop to below 4.5% y/y and HICP to around 4.0% y/y.

    • Implications: Inflation stays driven mainly by external costs (namely food and oil prices), which are out of the scope of CB monetary policy. In addition, the strong koruna should work as an anti-inflationary factor in the coming months. As the ECB hiked its interest rates by 25bp in July (the key rate was brought up to the Slovak level of 4.25%), the Slovak central bank can leave rates unchanged until the year-end, unless the ECB changes its rates by that time (which is not likely in the view of Erste Bank house). In such case, the NBS should only narrow the overnight rates corridor to a standard +/-100bp (which should not have any significant market impact).

    Published on  Thu, Jul 10 2008, 13:29 GMT

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    Slovakia: Conversion rate

    Tue, Jul 8 2008, 12:16 GMT
    by Michal Musâk

    Erste Bank der oesterreichischen Sparkassen AG


    Slovakia's euro conversion rate set at ERM-2 central parity

    • - The irrevocable conversion rate between the Slovak koruna and the euro was set at 30.1260 SKK/EUR.
    • - This matches market expectations, while a more practical 30.0000 SKK/EUR was seen as the alternative.
    • - After setting a number of precedents previously, the European authorities chose to follow the standard practice and set the conversion rate at the ERM-2 central parity.
    • - The exchange rate will still move until the end of the year but fluctuations are likely to be mild (similar to the last couple of weeks). The koruna should stay slightly at the weaker side of the ERM-2 central parity due to some difference in market interest rates and possible departure of some investors into more lucrative investments (however, the market should ensure that any departure from the forward exchange rate is only mild).
    • - The Slovak koruna's rapid appreciation within the ERM-2 also poses precedent for other Central European countries that aim to join the Eurozone, as they might see similar euro-rallies. Poland might be the nearest case (it aims to adopt the euro in 2012, which would require ERM-2 entry in late 2008 or early 2009; Erste Bank sees 2013 as a more probable date.)
    • - From the practical point of view, companies will have 30 days to start dual pricing in both euros and korunas in company-citizen relations.

    Published on  Tue, Jul 8 2008, 12:16 GMT

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    Croatia: 1Q08 BoP

    Tue, Jul 1 2008, 13:03 GMT
    by Alen Kovac

    Erste Bank der oesterreichischen Sparkassen AG


    The 1Q current account deficit amounted to EUR 2,488mn, widening on an annual basis by 23% and coming in slightly above our expectation (EUR 2.4bn). As the trade balance suggested, the pressure came from the merchandise account, as the deficit hit a new high of EUR 2.55bn, thus increasing by 18.2% y/y. Exports recorded only +8.7% y/y in nominal terms, while imports added 13.6% y/y. The service account was practically flat y/y, posting a EUR 100mn surplus. As expected, it failed to have an offsetting effect on the merchandise account deficit increase in 1Q. The income account posted an approx. EUR 260mn deficit (+23.6% y/y), surprising marginally on the upside and confirming pressures on the outflow side, as it increased by 13.1% to EUR 590mn. Current transfers confirmed their moderating trend, as the surplus amounted to EUR 224mn, down 9.6% y/y.

    The financing side offered the expected developments, as FDI inflows – after a strong performance in 1Q07 – halved, recording a EUR 688mn inflow, in line with the expectations that a lower proportion of the C/A deficit would be covered by FDI inflows in 2008. Portfolio investments accounted for EUR 477mn, while financing via other investments accelerated to EUR 1,686mn, thus showing increasing dependence on debt-creating financing.

    The 1Q08 C/A figures confirmed a continuing deterioration of the external balance, supporting a widening of the C/A deficit in 2008; currently, we see the C/A deficit in the 9+% of GDP zone. Merchandise account trends are expected to remain negative, as, besides the solid import growth in real terms, the nominal figures should be negatively influenced by the upsurge of energy and food prices. The income account is expected to put additional pressure on the C/A performance. The service account should moderate the pressures to some extent, but fail to offset the rising imbalances on the merchandise account. On the financing side, we expect solid FDI inflows, still significantly below the robust 2007 level. Nevertheless, we do not expect problems on the financing side or more severe pressures on the exchange rate.

    Published on  Tue, Jul 1 2008, 13:03 GMT

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    Slovakia: CB kept rates on hold

    Tue, Jun 24 2008, 15:17 GMT
    by Michal Musâk

    Erste Bank der oesterreichischen Sparkassen AG


    NBS left rates on hold, waits for ECB

    The Slovak central bank kept interest rates on hold. The 2W repo rate stays at 4.25%, as was widely expected. At the same time, the O/N rates were kept at 2.25/5.75%. NBS is currently in a waiting mode, as the ECB is likely to hike its base rate to 4.25%, which would make it aligned with the NBS policy rate. General market consensus is that the ECB will hike rates by 25bp at the beginning of July to combat inflation. After that, Erste Bank expects no more rate adjustments by the year-end, even though risks are now skewed to the upside. Should the ECB deliver a hike again this year, we expect the NBS to mirror its moves. After January 1, Eurozone interest rates will be valid for Slovakia along with euro adoption.

    Published on  Tue, Jun 24 2008, 15:17 GMT

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    Hungary: High wage outflow in the private sector

    Thu, Jun 19 2008, 08:24 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    According to the CSO, gross average wages in the economy increased by 10.6% y/y in April (after 9.9% y/y, seen in March), within which the private sector gross wage growth was 10% y/y, still seen as high.

    Furthermore, regular (ex bonuses) private sector gross wage growth - which is monitored closely by the central bank – accelerated to 9.1% y/y (from 7.7% y/y, published for March), indicating still uncomfortably high wage outflow in the sector.

    According to the CSO, there were three extra working days in April this year, which distorted the figure, thus some correction should come in May. In addition, the impact of the higher minimal wage could have been significant, as well.

    Although the existence of some distorting effects, the above figures still suggest the continuation of the rate hiking cycle. Another 25bp rate hike (to 8.75%) seems certain next Monday.

    Market reaction: the forint reacted with fast appreciation to the April nominal wage figures, due to intensifying rate hiking expectations.

    Published on  Thu, Jun 19 2008, 08:24 GMT

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    Croatia: May CPI hits new high at 6.4% y/y

    Mon, Jun 16 2008, 07:21 GMT
    by Alen Kovac

    Erste Bank der oesterreichischen Sparkassen AG


    • · May CPI figures surprised on the upside, recording a robust 1.1% m/m increase, which brought the annual figure back to 6+% territory. The structure of the inflation figures remains unchanged. Food and non-alcoholic beverages contributed substantially, accelerating 1.5% m/m. Transportation prices, driven by gasoline price hikes (+5.7% m/m), added a further 2.7% m/m. Finally, clothing and footwear prices remained on their seasonal upward trajectory, contributing an additional 2.2% m/m.

    • · The CPI figures confirmed the persistent inflation pressures, which, given the current status on the global commodity markets, are likely to continue. Thus, supply-side pressures are expected to continue putting pressure on the overall CPI performance. Despite government measures to alleviate some of the pressure using short-term measures such as a selective hike of electricity prices, space for a significant moderating effect is rather limited. Lasting pressure on food and energy prices would likely trigger second-round effects on the other prices, thereby further fuelling the pressure. In such a scenario, keeping wages under control becomes increasingly important. So far, wage dynamics are showing stable growth. Hence, the higher inflation figures so far have not produced significant pressure on wages. Regarding the outlook for the rest of 2008, we still see potential for some moderation towards the year-end, as the base effect will unwind. We continue to expect average inflation around 6%, but still exposed to upside risk coming from the food and energy side

    Published on  Mon, Jun 16 2008, 07:21 GMT

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    Hungary: CPI inflation accelerated to 7% y/y in May

    Wed, Jun 11 2008, 08:24 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Consumer prices rose 1.1% m/m in May, accelerating the 12-month CPI inflation rate to 7% (from 6.6% published for April). Our expectation was 6.7% y/y, while estimations of analyst fluctuated in the range of 6.6-6.8% y/y. Thus, the actual figures came as a big negative surprise.

    We did not estimate well the monthly increase in food prices, which was 1.9% in May, instead of our estimation of just 1.5% m/m. Prices of services surpised on the upside as well, rising by 0.6% m/m. Other drivers burdened the May CPI index more or less in line with expectations. The 3.2% m/m increase in fuel prices, and the accounting for the April increase in gas prices (7% on average), both added 0.2-0.2 pps to the headline CPI.

    In addition, it’s very negative that the seasonally adjusted core inflation showed 0.5% m/m increase, while the 12 month core rate further accelerated to 5.9%, from its April level of 5.6% y/y. All in all, the figures have significantly increased the likelihood of another rate hike at the June monetary meeting.

    Published on  Wed, Jun 11 2008, 08:24 GMT

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    Slovakia: 1Q08 GDP growth

    Tue, Jun 3 2008, 15:22 GMT
    by Mária Valachyová

    Erste Bank der oesterreichischen Sparkassen AG


    GDP in 1Q increased by 8.7% thanks to consumption and investments

    • The Slovak Statistical Office confirmed 1Q08 real GDP growth at 8.7% y/y, at the level of its earlier flash estimate.

    • The economic growth was driven mainly by domestic demand, more specifically surging household consumption and stock building. Indeed, household sector was surprisingly strong. Private consumption increased by 8.4% y/y, faster than our expectations at 6% y/y and 5.9% y/y seen in the final quarter of 2007. Higher spending was facilitated through the employment gains (employment increased by 2.7% in ESA methodology according to the flash estimate) and real wage growth, standing at 6.2% y/y, which was above our and market forecasts at 4%. For the first time since 2005, the real wage growth slightly outpaced productivity growth. Although, this is a signal for cautiousness on the central bank side and on the budgetary discipline, the real wage growth lagged the productivity gains significantly in the past two years, so we read the current development as a catch up for the previous periods. We continue to see harmonization of Slovak interest rates with the ECB rates during summer (i.e. 25bp rate cut to 4.0%).

    • Investment activity slowed down in the first quarter, the fixed investments increased only by 2.4% y/y, while stock building added around 2.5pp to the growth as we expected. Exports of goods and services increased by 12.2% y/y lagging 12.9% growth of imports.

    • This year, we expect the real GDP growth at 7.6% (as compared to the estimate of SUSR at 7.9%), which means slow down from hefty 10.4% seen in 2007. Opposite to the first quarter, growth structure will likely become more balanced in the next quarters, i.e. external demand should contribute more significantly to the growth..

    Published on  Tue, Jun 3 2008, 15:22 GMT

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    Hungary: Central bank hiked the base rate by 25bp to 8.50%

    Mon, May 26 2008, 14:27 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Today, the central bank hiked the base rate by 25bp, to 8.50%, in line with the market consensus. The decision did not come as surprise, but the statement of the council, however, proved to be more hawkish than expected earlier. The point is that the statement did not suggest at all that the current rate hiking cycle would come to an end sooner or later. Instead, by saying that “that there is significant upside risks in the time horizon relevant to monetary policy.....and “the Monetary Council continues to see a need to maintain tight monetary conditions and is ready to take the necessary steps if the inflation target comes under threat“, the continuation of rate hikes can not be excluded at the coming monetary meetings.

    At the press conference, governor Simor maintained its hawkish tone, by saying that there is increasing danger that inflationary expectations get stuck at high level. The council discussed three options: holding rates, a 25bp rate raise and a 25bp rate cut, but Simor said that they had voted for the 25bp hike in the base rate „with a safe majority." As for wage developments in the economy, he mentioned that “higher than expected wage growth could also mean that inflation expectations were not anchored as much as they would like." According to him, creditability of the central bank has important priority for them, which could again indicate more rate hike for the markets.

    In the May Quarterly Report on Inflation, the bank’s staff raised its forecast for the 2008 average inflation to 6.3% y/y, from the 5.9% y/y, published in the February Report. The 2009 average inflation forecast was raised to 4.2% y/y, up from the 3.6% y/y, projected in February. Please note however, that projections for the core inflation rates hardly changed for both years: the forecast for the 2008 core rate was cut to 5.1% y/y, from 5.2% y/y, while forecast for the 2009 core rate was raised to 3.7% y/y, from 3.6% y/y. The bank has provided forecast for the 2010 inflation for the first time, now. For 2010, the bank expects 3% y/y average CPI inflation. Thus, according to the latest CB projections, inflation will slow close to the mid term target just in 2010.

    The GDP forecasts have also been slightly raised. The bank’s staff expects 2.2% y/y and 3.2% y/y GDP growth, for 2008 and 2009, respectively. For 2010, they project 3.7% y/y.

    Published on  Mon, May 26 2008, 14:27 GMT

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    Serbia: Elections: DS−led pro−EU coaltiontakes majority of vores

    Tue, May 13 2008, 10:05 GMT
    by Alen Kovac

    Erste Bank der oesterreichischen Sparkassen AG


    DS-led pro-EU coalition takes majority of votes

    • · The pro-European coalition gathered around President’s Tadic Democratic Party (DS) received a strong boost from the electorate, as, according to the preliminary results from CeSID (Center for Free Elections and Democracy), it won 38.7% of votes, considerably more than the rival Serbian Radical Party (SRS), which accounted for 29.1% of the votes. The Democratic Party of Serbia (DSS) and New Serbia (NS) coalition headed by PM Kostunica took 11.3%, while the Socialist Party of Serbia (SPS) surprised on the upside, scoring 7.9 %.Finally, the Liberal Democratic Party (LDP), with 5.2%, is the last party to score over 5% and enter Parliament.

    • · Public interest was high, as a turnout of 60.7% was recorded. In contrast to the pre-election polls, the pro-European coalition enjoyed a comfortable lead over the radicals, thus giving a strong boost to Serbia’s EU prospects. Still, the situation is far from certain, as negotiation talks are about to begin. Tadic will likely seek partners among the LDP, SPS and minority parties, but remains open to discussion with all parties willing to support the EU path. SRS announced that it would try to form a government by assembling a coalition with PM Kostunica’s DSS and SPS, which may also be a realistic option.

    • · The coming days should reveal more about the direction of the post-election talks. Markets could remain volatile and sensitive to political news. Last week, the dinar depreciated to over the 83 RSD/EUR level. Currently, the dinar is moving in the 82-83 range. The general economic outlook remains sensitive to the political developments. A pro-EU coalition government would be supportive for FDI and capital inflows, thereby supporting growth prospects and overall macroeconomic stability. A government led by SRS would likely mean disbanding ties with the EU and a higher degree of macroeconomic uncertainty.

    Published on  Tue, May 13 2008, 10:05 GMT

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    Slovakia: Inflation ticked up in April

    Tue, May 13 2008, 08:54 GMT
    by Mária Valachyová

    Erste Bank der oesterreichischen Sparkassen AG


    Inflation increased to 4.3% against expected moderation

    • Consumer inflation increased from an annual rate of 4.2% in March to 4.3% in April, against average market expectations for stagnation at 4.2% and our more optimistic forecast of moderation to 4.1%.

    • On the month, the headline CPI index rose by 0.3%, largely owing to the food price increase. The prices of food rose by 1.2% m/m, well above the usual seasonal pattern (e.g. bread and cereals, meat, and fruits). Vegetables increased by 2.9% m/m, broadly in line with the season. The food prices remain the main up-side risk to our inflation forecast as we assume that favourable this-year harvest will bring the development of food prices back in line with the typical season later in the year. On the other hand, the stronger koruna (than we assumed earlier) represents downside risk, as the stronger currency should help to curb the prices of tradable goods.

    • Demand inflationary pressures stayed unchanged this month, according to our measure of demand-driven inflation (CPI ex regulated prices, taxes, food, fuel and imputed rents stayed at 2.1% y/y).

    •  Today’s CPI figures suggest that harmonized inflation could be higher, at 3.6-3.7% in April as compared to our pre-CPI forecast of 3.5% y/y. The 12-month HICP average should increase as well, to 2.4% from 2.2% seen in March (but will remain well below the Maastricht limit).

    • From monetary policy point of view, the central bank will align its policy rates with the ECB rates soon, in our view (the key Slovak interest rate is at 4.25%, while the ECB rates are at 4.0%). The April inflation figure might be slightly above the NBS forecasts. The prices of food were recognized as the upside risk also to the NBS estimates, but still, the food items are out of scope of the central bank’s tools. Closely watched demand inflationary pressures remained rather contained in April. We remain convinced that the NBS will cut interest rates by 25bp in May or June (the call for the May cut would be strengthened if the ERM-2 central parity was shifted already this month).

    Published on  Tue, May 13 2008, 08:54 GMT

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    Hungary: CPI inflation slowed to 6.7% y/y in March

    Fri, Apr 11 2008, 10:14 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Consumer prices rose 0.6% m/m in March. The 12-month inflation rate slowed to 6.7% (from 6.9% published for February). The y/y figure proved to be slightly lower than my estimation of 6.9% and was in line with the market consensus. The positive surpise came from food prices, rising by just 0.4% m/m in March. Thus, the main drivers of the March inflation were prices of fuel and clothes, rising by 3.3% m/m and 2.8% m/m, respectively. The latter is due to the usual seasonality in Hungary. Prices of services rose 0.6% m/m. The seasonally adjusted core inflation showed 0.5% m/m increase, while the 12 month core rate remained at its February level of 5.3%. Assessment: the figures are seen as “not bad”, while their structure more or less met expectations. The impact of this CPI figure on the central bank’s monetary policy could be neutral, in my view.

    Published on  Fri, Apr 11 2008, 10:14 GMT

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    Slovakia: March inflation

    Fri, Apr 11 2008, 09:22 GMT
    by Mária Valachyová

    Erste Bank der oesterreichischen Sparkassen AG


    • 1. CPI inflation reached 0.3% m/m in March, putting the annual growth to 4.2% up from 4.0% in February. That matched our forecasts and was a notch above the market consensus at 4.1%.

    • 2. The structure of inflation was broadly in line with our expectations – the main driver were heat prices (which increased by 1.3% m/m as of March) and food prices, which rose by 0.3% m/m, a bit more than we assumed. Imputed rents increased in line with our forecast by 0.7% m/m.

    • 3. The food prices continue to pose the main risk to our inflation forecast as the prices of rise and wheat products increased in April. Please note that the food price growth is not necessarily a threat to Slovakia’s euro adoption in discussion about price sustainability, as this phenomenon is shared with other EU countries. Prices of energies should not rise further in coming months, as there was no hike announced by the regulator.

    • 4. Today’s CPI figures suggest that harmonized inflation could be a notch higher, at 3.6% as compared to our pre- CPI forecast of 3.5% y/y. However, our forecast of 12-month HICP average remains unchanged at 2.2% and will be comfortably below the Maastricht limit. Convergence criterion stood at 3.1% in February and might increase further to 3.2% in March. That means that Slovakia will meet inflation criterion with a sizeable buffer of about 1pp. While discussions about sustainability are possible, with such a big cushion, Slovakia should get a nod to adopt euro.

    • 5. Demand inflationary pressures remain contained, although our measure of demand-driven inflation (CPI ex regulated prices, taxes, food, fuel and imputed rents) slightly increased to 1.9% y/y from 1.8% in February.

    • 6. Today’s CPI figure has a little monetary policy implication. The central bank will keep its wait-and-see stance and after Slovakia gets green light to adopt the euro, we expect harmonisation of the interest rates to the level prevailing in the Euro area (i.e. to 4.0% from Slovak level of 4.25%).

    • 7. Also today, the February foreign trade balance was released and reached a SKK 8.3bn surplus, well above average market and our forecast for a broadly balanced trade. As compared to our forecast, export growth was faster than we assumed at 24% y/y. The structure is not known yet but judging by industrial production data, the sectors of car production and machinery were the main drivers. After today’s figure we might revise our full year estimate from SKK -4bn towards a surplus.

    Published on  Fri, Apr 11 2008, 09:22 GMT

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    Croatia: 2007 current account deficit widened to 8.6% of GDP

    Wed, Apr 2 2008, 07:43 GMT
    by Alen Kovac

    Erste Bank der oesterreichischen Sparkassen AG


    • · The 4Q current account figures came in broadly in line with expectations, posting a slightly higher than expected deficit of EUR 1.89bn. As one could have expected, the merchandise account continued to burden the current account performance. Thus, given the higher energy prices and EU slowdown, the widening of the merchandise account deficit in 4Q07 (by 21.4% y/y) came as no surprise. Goods exports grew just 4.1% y/y, while imports posted a solid 12% y/y increase. The service account finished in positive territory, recording a 14.7% y/y higher surplus of EUR 370mn. The income and current transfer accounts also presented no surprise; only current transfers surprised slightly on the upside, recording a 9.3% y/y higher surplus.

    • · The FY07 current account figures showed further deterioration and a widening of the current account deficit to 8.6% of GDP. Thus, the C/A widening trend extended to three years in a row. In nominal terms, the current account deficit surpassed the EUR 3bn threshold, amounting to EUR 3.2bn, up 19.1% y/y. The story remains well known - the merchandise account continues to widen, reaching EUR 9.4bn (+13.1% y/y), while the service sector continues to offset a proportion of the increasing imbalance on the merchandise account (56% of the merchandise account deficit increase has been covered by the increase in the service account surplus). The income account deficit showed signs of stabilization. Thus, the stagnating current account surplus managed to cover roughly 92% of the income deficit.

    • · In 2007, the financing side showed somewhat more favorable trends than in 2006. FDI inflows were robust, reaching EUR 3.6bn, up 32% y/y. Thus, strong FDI inflows (9.7% of GDP) comfortably covered the current account deficit (8.6% of GDP). Hence, the need for debt-creating financing was significantly lower. Still, as the majority of FDI was likely linked to the financial sector and was regulatory-driven, in the long run, maintaining the current FDI inflow level is not likely, again shifting the pressure onto debt-creating financing.

    • · For 2008, we continue to expect a C/A deficit slightly above 8% of GDP, but with an eventual mild narrowing of the imbalance. The export performance should not be significantly impacted by the EU economic performance and deteriorating competitiveness. Pressure from the import side should ease to some extent, due to lower consumption spending. Nevertheless, capital goods and energy imports should work in the other direction. Some upside risk also comes from the tourism sector’s performance - the uncertainty related to Euro 2008 competition negatively affecting the tourist season - and higher profit repatriation as a consequence of the unstable global environment.

    Published on  Wed, Apr 2 2008, 07:43 GMT

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    Hungary: C/A deficit amounted to EUR 1.113bn in 4Q07

    Mon, Mar 31 2008, 08:53 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    The central bank has published C/A balance figures this morning. The C/A deficit amounted to EUR 1.113bn in October-December 2007 (our expectation was EUR 1.25bn), taking the cumulative C/A deficit for FY 2007 to EUR 5.060bn (5% of GDP). At the same time, the 2006 C/A deficit was revised downwards to 6.1% of GDP, from 6.5% of GDP. To sum up it, the year 2007 brought significant improvement in the external economic balance situation, thanks to the favorable processes on the trade balance.
    The trade balance remained in surplus, amounting to EUR 395mn in 4Q07, raising the FY 2007 trade surplus to EUR 1.431bn (1.42% of GDP). In 2006, the trade balance showed a deficit of 0.98% of GDP.
    The deficit on the “Incomes” remained high in 4Q07, as well, amounting to EUR 1.994bn, which was EUR 381mn higher, seen in the same period of 2006.


    On the financing side of the balance, non-debt creating financing finally turned to positive (EUR 588mn) in the last quarter of 2007. In FY 2007, however, it was still in negative territory. According to the statistics, inward and outward non-debt capital transactions showed a net outflow of EUR 3.852bn in 2007. It was favorable, however, that the FDI inflow to Hungary was higher than expected (EUR 4.170bn).

    Published on  Mon, Mar 31 2008, 08:53 GMT

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    Slovakia: CB kept interest rates on hold

    Wed, Mar 26 2008, 10:42 GMT
    by Michal Musâk

    Erste Bank der oesterreichischen Sparkassen AG


    Interest rates remain on hold, as expected

    Slovak central bank left policy interest rates intact on its meeting today, in line with the widespread expectations of the market. The 2W repo rate stays at 4.25%, while O/N rates remain at 2.25/5.75%. Press conference and comments will be released at 13:00 CET.

    Without the 2009 euro adoption plan, inflation acceleration could have warranted an interest rates hike (although main sources of the pick-up in price growth in recent months were food prices, admittedly outside the influence of the monetary policy). However, with euro adoption in sights (assuming assessment by European authorities will be favourable) any rate increase would only have a short-lived impact, as Slovakia will also adopt European interest rates along with the euro.

    Current base ECB rate stands at 4.0% and the market predicts 50bp in ECB rate cuts by the year-end. Subsequently, we think that the Slovak CB cuts rates to the ECB level as soon as Slovakia gets positive evaluation and 2009 euro adoption will be sure enough (in May or June). On the contrary, in the improbable scenario that our 2009 euro bid is rejected, CB rates might gradually head upwards.

    Published on  Wed, Mar 26 2008, 10:42 GMT

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    Hungary: Confusing January nominal wage figures

    Wed, Mar 19 2008, 16:42 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    According to the CSO, gross average wages in the economy dropped 1.5 y/y in January 2008, while net wages decreased by 0.2% y/y. However, what at first sights seems extremely favorable from the point of view of the inflation development hides a serious one-off distorting effect.

    Looking at the details of the figure, the point is that in the public sector, gross wages dropped 14.6% y/y in January. This sharp drop can be explained by the fact that in the public sector January wages do not contain the entire 13th month salary, opposite the base year (2007 January). According to the CSO, 5/12 part of entire 13th month salary had been paid in monthly “installments" already last year. Thus in January 2008, public sector workers got just the remaining 7/12 part of their 2007 13th month salary. In addition, they got the 1/12 part of their 2008 13th month salary already in January 2008. To put it all in a nutshell, the 2007 January base figure in the public sector contains the effect of an entire 13th month salary, while the current 2008 January figure contains just 8/12 part of it.

    At the same time, the more closely monitored private sector gross wage growth was 9.7% y/y, still seen as high.

    Regular (ex bonuses) private sector gross wage growth - which is the first priority for the central bank – accelerated to 8.7% y/y (from 8.2% y/y, published for December), still above the tolerance figure of around 7.5%- 7.7% y/y, earlier suggested by the central bank.

    Assesment: According to the Januray data, wage formation in the private sector seems not too favorable from the point of view of the mid term inflation outlook. However, there is no point in jumping to strong conclusions, based on just one figure, thus our view is that the above wage figures would not be the main decisive factor in the final outcome at the coming rate-setting meeting (March 31). However, if the NBH is in a rate hiking mood, these figures will not make them change their mind.

    Published on  Wed, Mar 19 2008, 16:42 GMT

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    Hungary: S&P revised Hungary's credit rating outlook to negative from stable

    Mon, Mar 17 2008, 12:06 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Standard & Poor's credit rating agency unexpectedly revised its outlook on Hungary sovereign credit ratings to negative from stable, due to the weakening perspective for sustained consolidation of public finances.

    At the same time the agency affirmed Hungary's 'BBB+' long-term and 'A-2' short-term sovereign credit ratings.

    They said that risks for the dilution of fiscal reforms increased and with the increasing cost of external borrowing this may interrupt Hungary's progress in reducing its deficit from 2009 onwards.

    Please note that the agency had revised its outlook on the Hungary sovereign credit ratings to stable from negative in 2006 December. At that time, the main reason for improving the outlook had been the progress in fiscal consolidation.

    Assessment: the adverse step announced this afternoon could be seen as a serious warning for the government not to loose the fiscal consolidation process in a run up to the election campaign. (Next Parliamentary elections are due in spring 2010). We think that so far there have not been any serious signs of fiscal loosening; the 2008 deficit target of 4% of GDP will be reached relatively easily. But the step still shows that the agency has already concerns about the continuation of fiscal consolidation in the 2009-2010 periods. We are afraid that the step taken just now was not independent from the outcome of the referendum held last Sunday.

    Market reaction: the forint immediately weakened above 260 against the EUR, and then consolidated, due to favorable US CPI figures.

    Published on  Mon, Mar 17 2008, 12:06 GMT

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    Slovenia: Inflation up to 4.0% in February on imputed rents

    Thu, Mar 13 2008, 14:57 GMT
    by Michal Musâk

    Erste Bank der oesterreichischen Sparkassen AG


    CPI inflation reached 0.4% m/m in February, which means it edged up to 4.0% y/y after 3.8% y/y a month earlier.

    The figure was above our (3.8%) and market expectations (3.9%). The main source of upward surprise was the growth of imputed rents by 3.9% on a monthly basis. However, these are not included within the consumer basket of the HICP inflation and hence do not affect it.

     The food prices grew only slightly stronger than we estimated, leaving the question, whether recent excessive food price growth was only temporary or permanent, unanswered. We see this factor as the main upside risk to our forecast for 2008. Please note that the food price growth is not necessarily a threat to Slovakia’s euro adoption in discussion about price sustainability, as this phenomenon is shared with other EU countries.

    For EU-harmonized inflation (to be released tomorrow) today’s release bears no negative consequences. As imputed rents are not included in its basket, we stick to our pre-CPI forecast at 3.2% y/y (0.1% m/m). One month ahead of euro evaluation Slovakia should continue to meet inflation criterion with a sizeable buffer of about 1pp. While discussions about sustainability are possible, with such a big cushion, Slovakia should get a nod to adopt euro. Moreover, Slovak annual HICP inflation was equal to inflation in the Eurozone (in January, ie not the 12M average, which will be used for evaluation), which gives Slovak authorities some additional argumentative leverage in discussions.

    No emerging demand pressures are seen at present. Indeed, after adjusting for exogenous items (regulated prices, taxes, food, fuel and imputed rents), our measure of demand-driven inflation slowed down from 1.5% y/y in January to 1.3% y/y in February. Hence, despite the upward surprise, the figure is neutral for monetary policy.

    Due to higher growth of imputed rents, there is an upward risk to out forecast for end-year CPI but the figure is neutral for HICP estimate. We still deem food prices as the main risk for both targets.

    Also today, the January foreign trade balance was released and reached a SKK 6.6bn surplus, above market forecast of SKK 4.3bn surplus and our even more pessimistic estimate. On a 12M basis, the trade balance improved from (revised) 1.2% of GDP in December to 1.1% of GDP in January. The structure is not known yet.

    Published on  Thu, Mar 13 2008, 14:57 GMT

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    Hungary: CPI inflation slowed to 6.9% y/y in February

    Tue, Mar 11 2008, 16:16 GMT
    by Orsolya Nyeste

    Erste Bank der oesterreichischen Sparkassen AG


    Consumer prices rose 1.1% m/m in February. The 12-month inflation rate slowed to 6.9% (from 7.1% published for January). The y/y figure proved to be a bit lower than both our estimation and the market consensus of 7%.

    The structure of the February index more or less met expectations. Due the accounting for gas (15.4% m/m) and electricity price (9.8% m/m) increases in the statistics, household energy prices rose 8.2 m/m. It’s seems favorable, however, that price increasing pressure in the foodstuff catagory have started to mitigate (+0.8% m/m in Februry), after sharp rises, characterized the previous months. Prices of services rose 0.7% on monthly level, driven by furhter accounting for increases in admindistrative prices. The seasonally adjusted core inflation showed 0.4% m/m and 5.3% y/y increases.

    Assessment: Given the lack of domestic-demand driven price pressure in the structure of the latest figure, it may ease rate hiking pressure on the central bank.

    Published on  Tue, Mar 11 2008, 16:16 GMT

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    Serbian government splits over Kosovo, elections in May

    Tue, Mar 11 2008, 09:11 GMT
    by Alen Kovac

    Erste Bank der oesterreichischen Sparkassen AG


    · The ruling coalition failed to reach consensus over the Kosovo issue, resulting in a government collapse and early elections scheduled for May to resolve the political crisis. The crisis arose due to the lack of a common view on whether Serbia should sign the Stabilization and Association Agreement with the EU. PM Kostunica (DSS) opposed signing the agreement and insisted on an EU declaration over Serbia’s territorial integrity including Kosovo, while President Tadic (DS) is certain that the Kosovo issue would be better solved through a continuation of EU negotiations and maintaining ties with the EU.

    · At the moment, political risks in Serbia are rising. In environment where nationalist issues are gaining importance, the strength of the democratic bloc could deteriorate in favor of a radical option. The outcome of the elections could (as always) be tight and should send a signal from the electorate regarding the strengthening of EU ties or moving toward a more nationalist policy. It will be interesting to see which option DSS takes (especially if the radical option fails to ensure a majority in the parliament), as DSS has recently leaned more towards the radicals.

    · The equity market’s reaction to the news has been negative (as expected), while the exchange rate remained stable in the 83.2-83.7 range. Nevertheless, a victory for the radical option and a step back from EU integration would endanger macroeconomic stability, given Serbia’s high C/A deficit and sensitivity to FX inflows. Such a scenario would put pressure on the exchange rate and the NBS would need to intervene to prevent significant depreciation and rising inflation pressures. Also, in the coming period, a technical government will be in charge. Thus, tackling of structural reforms and acceleration of the privatization process is not to be expected. Currently political situation in Serbia should not have significant impact on the other countries in SEE region. Nevertheless victory of radical option could have deteriorating effect on the regional investment climate, while possible escalation of violence in Kosovo could have strong negative effect on the regional tourist sector performance.

    Published on  Tue, Mar 11 2008, 09:11 GMT

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    GDP in 4Q increased by 14.3%, influenced by one−off cigarette taxes

    Tue, Mar 4 2008, 14:45 GMT
    by Mária Valachyová

    Erste Bank der oesterreichischen Sparkassen AG


      - The Slovak Statistical Office upped 4Q07 real GDP estimate to 14.3% y/y, from flash estimate of 14.1% y/y.

      - As was indicated earlier, pre-stocking of cigarettes ahead of January excise tax hike contributed to the growth significantly (by about 4.5 percentage points).

      - Apart from cigarettes, the structure was balanced. Household consumption growth slowed down in line with our expectations to 5.9% y/y from 8.0% seen in 3Q07, while real wage growth (coming at 4.5% y/y) was significantly below the productivity gain. This will be positive message for the central bank, confirming its view of contained inflationary pressures in economy. We continue to see stability in the interest rates at least until May, when the NBS might bring rates down to the level prevailing in the Eurozone (currently 4.0%).

      - Labour market continued to improve, employment (ILO methodology) increased by 2.8% y/y, out of which 0.8 percentage point was added by the people employed abroad. Unemployment rate declined to 10.3% (our expectations was 10.5%).

      - Investment activity remained strong (fixed investments accelerated to 8.9% y/y from 6.0% in 3Q07), which is positive for the future growth and profitability. Depletion of stock building (due to huge cigarettes stocks) will in coming periods put a break on gross investments growth. Exports increased by 16% y/y (twice as much as in the previous quarter) while imports increased less, by 11.6% y/y. The biggest valued was added by industry: car, machines and electronics segments, which are the key export drivers.

      - Outlook: The statistical office expects real GDP growth in first half of 2008 at 7.5%, which is above our estimate at 6.8%. We think that the lower tax intake from cigarette taxes will slow down the growth rate in the first half of the year. We see the annual growth at 6.7%, which means slow down from hefty 10.4% seen in 2007. Apart from cigarettes, which will shrink the annual growth, the car factories will not increase their production that much as they did in the previous two years.

      Published on  Tue, Mar 4 2008, 14:45 GMT

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      Croatia− CPI inflation accelerated to 6.2% y/y in January

      Mon, Feb 18 2008, 15:05 GMT
      by Alen Kovac

      Erste Bank der oesterreichischen Sparkassen AG


        • · January brought a 0.7% m/m pick-up of consumer prices, resulting in a 6.2% y/y rate, thus meeting our expectations (6.1% y/y). As expected, food and beverages prices (+2.1% m/m) contributed heavily to the headline figure. On top of that, housing, water, electricity, gas and other fuel prices rose by 2.4% m/m, due to hikes in some public utilities. On the other hand, clothes and footwear prices declined by 7.5% m/m, due to a seasonal sales effect, thus easing the pressure to some extent.
        • · In the coming months, we expect the pressure to remain, while the yearly figures should be negatively affected by a base effect. In February, the impact from the government agreement with large retailers to cut prices should be visible in the CPI figures. Therefore, some moderation may occur. Towards the year-end, we see the y/y figure moderating to some extent, while, on average, we see inflation at slightly above the 5% threshold.

        Published on  Mon, Feb 18 2008, 15:05 GMT

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        Hungary − CPI inflation stood at 7.1% y/y in January 2008, GDP rose just 0.8% y/y in 4Q07

        Thu, Feb 14 2008, 10:02 GMT
        by Orsolya Nyeste

        Erste Bank der oesterreichischen Sparkassen AG


        • • Consumer prices rose 1% m/m in January 2008, while the 12-month inflation rate slowed to 7.1% (from 7.4% published for December). The y/y figure proved to be a bit higher than my expectation of 7%, while it was in line with the market consensus.
        • • On the one hand, the main driver of the inflation in January remained foodstuffs, further rising by 1.9% m/m. On the other hand, prices of services rose 1.7% on monthly level, driven by sharp increases in admindistrative prices (public transport, postal services, water and sewage fees).
        • • Prices of alcoholic beverages and tobbaco rose 1.7% m/m, as well, due to further increase in excise taxes, while prices of clothes dropped by 4.5%, due to seasonal sales.
        • • The seasonally adjusted core inflation showed 0.6% m/m and 5.2% y/y changes.
        • • The 4Q07 GDP figures remained rather disappointing. According to the CSO’s flash estimate, GDP rose just 0.8% y/y in the last quarter of 2007, after the 0.9% y/y seen in 3Q07. The actual figure was again lower than my expectation and the consensus estimate. Compared to the previous quarter, GDP rose 0.1%, while in FY 2007 GDP rose just 1.3% y/y.
        Assessment: In the last couple of days, expectations for a central bank rate hike (either in February) have intensified on markets, due to the poor inflation outlook and turbulences around the forint exchange rate. Although the fact that growth outlook does not affect directly the monetary policy decisions, the latest GDP figure could be an argument for “no rate hike”, especially among the more dovish members of the council. At the same time, the actual January inflation figure is not expected to have any role in the rate decision. Instead, the predictions of the bank’s staff for the 2008 and 2009 average inflation in the coming Inflation Report should be more influential. The inflation forecast for the 2008 average inflation is expected to be raised by at least one pp (to around 6% y/y), while the prediction for 2009 seems to exceed the mid term target of 3% y/y. However, the expected increases in the inflation forecasts would not automatically mean a rate hike, in my view, but this may again pose some creditability questions on the markets.

        Published on  Thu, Feb 14 2008, 10:02 GMT

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        Slovakia: GDP growth

        Thu, Feb 14 2008, 09:44 GMT
        by Mária Valachyová

        Erste Bank der oesterreichischen Sparkassen AG


            • - According to a flash estimate of the Stats Office, real GDP growth reached strong 14.1% y/y in the final quarter of 2007, outpacing our and market’s average estimate at 9.1% and 8.8%, respectively. Upward surprise was caused by the decision of the Statistical Office to include one-off excise tax intakes from cigarettes to the final quarter of 2007. The prices of cigarettes increased as of January 2008 (due to EU-legislative) by 18%, which lead to a prestocking of the distribution companies in the equivalent of 8-month cigarette sales in 4Q07. The tax income (estimated at SKK 9bn) was thus accounted into 4Q07.
            • - Excluding the cigarette effect, the real GDP would have increased by 9.7%, which is closer to our initial estimate.
            • - From consumption side, the Stats Office indicated that the growth was driven by both foreign and domestic demand (especially stocks). From production side, highest value was again added in industry, namely in the production of machines, cars and electrics’ equipments.
            • - Implications and outlook: excise tax intake will be lower in the first half of 2008, so we will see lower GDP growth in that period than would be otherwise. In January 2009, another round of cigarettes tax hike is planned, hence the real GDP growth in the final quarter of 2008 should be unaffected by unfavorable (high) base (assuming another pre-stocking). Although the structure is not known yet, underlying growth remains strong and without showing signs of overheating (demand inflation pressures remain low). Monetary policy-wise, we do not see any strong implications from the figure.
            • - The koruna firmed to 32.83 SKK/EUR from 32.90 SKK/EUR traded in the morning. The unit might approach the alltime high of 32.70 SKK/EUR in reaction.

            Published on  Thu, Feb 14 2008, 09:44 GMT

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            Slovakia: January consumer inflation

            Mon, Feb 11 2008, 11:12 GMT
            by Mária Valachyová

            Erste Bank der oesterreichischen Sparkassen AG


              • # Consumer inflation increased above expectations to 3.8% y/y
              • # HICP should increase in lesser extent to 3.1% y/y, ...
              • # ... Maastricht limit will be met comfortably
              • # Foreing trade with bigger than expected deficit in December,...
              • # ... nevertheless, annual balance improved significantly
              • # Central bank to keep interest rates unchanged

                Published on  Mon, Feb 11 2008, 11:12 GMT

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                Slovakia: Inflation picked up to 3.4% in line with our expectations, trade disappointed

                Mon, Jan 14 2008, 09:25 GMT
                by Mária Valachyová

                Erste Bank der oesterreichischen Sparkassen AG


                    • · December inflation came in line with our forecasts at 0.3% on the month and 3.4% on the year, representing an increase from 3.1% in November. Market expected a notch lower inflation at 3.3%.

                    • · Structure also did not surprise this time. The monthly increase owed to higher prices of food, fuels and imputed rents.

                    • · After this figure, we stick to our former December HICP estimate at 0.3% m/m and 2.5% y/y. The Maastricht criterion will be met almost for sure in December and with a substantial buffer later in spring. We expect 12-month HICP average at around 2.0%-2.1% in spring 2008 (at time of euro preparedness evaluation), which should be around 0.6-1.0pp below the reference limit.

                    • · Demand inflation pressures stayed unchanged. CPI ex food and fuels and imputed rents (our preferred proxy for demand inflation pressures) stayed at 1.8% y/y.

                    • · Outlook: CPI inflation will stay at around 3.5% until May. HICP will likely increase as of January due to base effects (to around 2.9% y/y), the 12-month average should, nevertheless, remain at around 2%. Regarding monetary policy, the central bank will remain cautious. The increase in inflation is mostly driven by global factors (food and fuels), which are out of scope of central bank policy. However, the central bank will watch for the risks stemming from the secondary impact of more expensive food and fuels upon the CPI basket. We count on koruna appreciation in coming weeks, which should tighten monetary conditions further and expect no policy change in the coming months (until May 2008 when the evaluation of Slovakia preparedness to adopt the euro will be known - then the NBS might deliver a final 25bp rate cut to 4.0%).

                    • November foreign trade ended in a deficit of SKK 7.7bn, well below our and market expectations for a -1.6bn SKK. As compared to our forecasts, exports were much lower than we assumed, growing by 9.9% y/y down from 14.5% in October (we foresaw growth at around 18%). Although, production data already hinted at disappointment when the key export oriented segments delivered lower production than we thought. The trade balance will very likely end in red again in December (due to elevated imports); however, whole-year figure will be much better than a year ago. We expect deficit at around 0.8% of GDP as compared to 4.5% seen in 2006. In this year, the deficit should remain low, below 1 % of GDP.

                  Published on  Mon, Jan 14 2008, 09:25 GMT

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                  Croatia: 3Q GDP growth moderated to +5.1% y/y

                  Fri, Dec 28 2007, 14:58 GMT
                  by Alen Kovac

                  Erste Bank der oesterreichischen Sparkassen AG


                  · 3Q GDP figures posted 5.1% increased, which was slightly below our expectations. Nevertheless, domestic demand remained strong, supported by ongoing strong consumption momentum. Hence, private consumption increased 6.2% y/y in real terms, which was expected by the monthly frequency retail trade figures.

                  · Fixed capital formation was in line with the expectations, as we expected that investment activity would continue to moderate as was seen in the 2Q supported by construction activity indices and also likely some slowdown of public investment activity prior to the elections. Elections on the other hand were supportive to public consumption that recorded 4.4% y/y increase confirming the accelerating trend from recent quarters. Change in inventories had more negative effect on the overall performance than was seen last year which to some extent lowered the overall GDP growth rate.

                  · Exports recorded solid 7.3% y/y growth, confirming good tourist season results and trade balance figures. Imports followed closely increasing 7.0% y/y, hence usual 3Q positive net export contribution only marginally increased.

                  · FY07 GDP figure we continue to expect close to 6% y/y, with some moderation in last quarter. In 2008 we continue to anticipate slight slowdown of domestic demand and GDP growth rate in the 5% region.

                  Published on  Fri, Dec 28 2007, 14:58 GMT

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                  NBS left interest rates on hold as expected

                  Tue, Dec 18 2007, 12:33 GMT
                  by Mária Valachyová

                  Erste Bank der oesterreichischen Sparkassen AG


                  The Bank Board keeps the interest rates steady as expected

                  The central bank kept interest rates unchanged, in line with the market and our expectations. The key 2W repo rate remains at 4.25%, while the O/N corridor stays at 2.25%/5.75%. Comments of the CB officials as well as a voting ratio (if there was any proposal to change the interest rates) will be known later in the day.

                  Over the past month, the economic picture did not change a lot. True, inflation in November outpaced market and the CB expectations but mainly due to food prices, which are anyway out of scope of the CB policy. We think that monetary conditions are still slightly tightening at present.

                  Regarding outlook, inflationary risks will keep the CB in cautious stance also in coming months. Nevertheless, ahead of the planned euro adoption in January 2009, the CB will mostly follow the ECB steps. Slovak interest rates are currently 25bp above the ECB’s 4.0% and we expect this situation to last till the second quarter of 2008 when the evaluation whether Slovakia can adopt the euro will be known. Then the NBS will likely deliver a final 25bp cut to the Euro zone’s 4.0% and further on mirror the ECB steps (rates in the Euro zone are expected to remain unchanged during the next year with upside risks at the end of 2008).

                  Published on  Tue, Dec 18 2007, 12:33 GMT

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                  Hungary − CPI rose 7.1% y/y in November

                  Tue, Dec 11 2007, 12:32 GMT
                  by Orsolya Nyeste

                  Erste Bank der oesterreichischen Sparkassen AG


                  Hungary: CPI inflation stood at 7.1% y/y in November


                  Consumer prices rose 0.6% m/m in November. The 12-month inflation rate further accelerated to 7.1% (from 6.7% published for October). The actual y/y figure proved to be higher than my expectation of 6.9%, but was in line with the market consensus. Food prices and fuel prices were again to blame for the acceleration of the yearly index.

                  Food prices rose 1.4 m/m, due to sharp increases in prices of cooking oil, flour and cheese. Fuel prices rose 3.3% m/m, pushing the monthly index of the category of „other goods and fuels to 0.9% m/m. Apart from the food and fuel factor, other items did not show significant changes on monthly level.

                  The seasonally adjusted core inflation rose 0.5% m/m, thus, the 12-month core CPI rate slightly increased to 4.6%, from 4.4% in October.

                  The November CPI figures are unlikely to change the current cautious of stance of the monetary policy. No rate change is expected for December 17.

                  Published on  Tue, Dec 11 2007, 12:32 GMT

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                  Slovakia: Inflation slowed down in November

                  Tue, Dec 11 2007, 12:26 GMT
                  by Mária Valachyová

                  Erste Bank der oesterreichischen Sparkassen AG


                  Inflation slightly declined to 3.1% in November as expected

                  • # Inflation slowed down in November to 3.1% y/y down from 3.3% in October
                  • # November HICP could reach 2.3% y/y versus our previous expectations of 2.2%
                  • # Demand inflation pressures slightly increased
                  • # We expect central bank to stay on hold

                  Published on  Tue, Dec 11 2007, 12:26 GMT

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                  Short Note

                  Fri, Sep 7 2007, 14:58 GMT
                  by Orsolya Nyeste

                  Erste Bank der oesterreichischen Sparkassen AG


                  Finance Ministry published a budget deficit of HUF 69.1bn for August 2007
                  • • The Finance Ministry published a budget deficit of HUF 69.1bn for August 2007, taking the cumulative budget deficit for the first eight months of the year to HUF 982.2bn, 64.2% of the ministry’s full-year CF deficit forecast.
                  • • The August deficit proved to be lower than the ministry’s earlier monthly forecast of a deficit of HUF 87.5bn.
                  • • The details of the July figures will be available on September 18.
                  • • Another more favourable than expected monthly budget balance figure suggests continued improving trend in budget processes. The ESA-based deficit for FY2007 seems almost sure to be lower than the official forecast of 6.4% of GDP. Our forecast is 6% of GDP.
                  • • Market reaction: neutral

                  Published on  Fri, Sep 7 2007, 15:00 GMT

                  Erste Bank http://global.treasury.erstebank.com | Rainer.Singer@erstebank.at

                  Legal disclaimer and risk disclosure

                  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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