CEE Macroeconomic and Fixed Income Research

Chart of the Day:

CEE 2Q14 GDP releases: Flash releases for the 2Q14 GDP figures from last week provided a mixed picture. Albeit Hungary and Slovakia delivered a positive surprise, Romania stands out as the negative outlier. In the latter, we now clearly see downside risks to our call of a 3% yearly average GDP growth (in 1Q14, the yearly expansion was still 3.9% in Romania). As for Hungary, however, we decided to increase our forecast for the yearly growth figure from 3% to 3.3%. This still means a slowdown vs. 1H14 (in the first two quarters, growth averaged 3.75% in Hungary). Yearly growth figures should decline in 2H14 in CEE as the European economic expansion seems to remain quite modest at best, while the intensification of Ukrainian-Russian tensions and the subsequent economic sanctions can bite into growth more strongly in the second half of this year.

Analysts’ view:

PL Macro: The deadline concerning pension reform in Poland elapsed at the end of July, when individuals had to decide between staying in private pension system or switch to a public one, roughly 20% of people decided to stay with OPF. As this is mostly higher income group the percentage equivalent on contributions may be even higher (as this group's contribution is most likely above average). The news is neutral for bond and FX market.

TR Macro: Moody’s said on Friday that it is concerned that the structural reforms in Turkey would take a backseat until the political outlook becomes more stable and that Turkey would remain susceptible to the global sentiment. We had the impression that these statements could probably be a sign that Moody’s is closely monitoring the developments rather than issuing a warning for a downgrade. Moody’s next prescheduled review date for Turkey is December 5 after S&P on November 21 and Fitch on October 3. The 12-month forward looking CPI expectation rose to 7.35% in August from the previous month's 7.27%. The deterioration in inflation expectations, the signs of dismal pricing behavior in the July inflation data along with the depreciation pressure on the TRY pose risks to our 25bps rate cut expectation for the rest of the year.

TR Politics: On Thursday August 21 Current Prime Minister and President Elect Recep Tayyip Erdogan is expected to unveil Turkey’s next prime minister who will be in charge following Erdogan’s exit. Current Foreign Minister Ahmet Davutoglu is widely perceived as the strongest candidate, but the media is mentioning other names as well..