Economic Expectations for the CEE Region Decline

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

Mannheim, (PresseBox) - In January 2014 economic expectations for Central and Eastern Europe including Turkey (CEE region) have dropped by 17.6 points. The ZEW-Erste Group Bank Economic Sentiment Indicator for the CEE region now stands at 19.9 points, its lowest level since December 2012. Among the individual CEE countries the highest decline is observed for the economic expectations for Turkey. The respective indicator has lost 40.9 points in January and now stands at its third-lowest level ever (minus 37.5 points). The negative result for Turkey mirrors an increased uncertainty triggered by the corruption scandal in Turkey starting at the end of 2013.

The ZEW-Erste Group Bank Economic Sentiment Indicator for Central and Eastern Europe reflects the financial market experts' expectations for the CEE region on a six-month time horizon. The indicator has been compiled on a monthly basis together with further financial market data by the Centre for European Economic Research (ZEW) in Mannheim with the support of Erste Group Bank, Vienna, since 2007.

Within the scope of this month's special question experts were asked to state the reasons behind their economic expectations for the CEE region. The political tensions around the corruption crisis in Turkey are the most widely cited reason for pessimism. The experts also list reasons to remain optimistic about the future development of the region. Among them are the increased external demand as a result of an improved economic situation in the Eurozone as well as increased industrial production in the CEE countries.

The experts' assessment of the current economic situation for the CEE region has also worsened significantly in January. The respective indicator has decreased by 14.8 points to minus 2.9 points. This goes along with a major decrease of experts' assessment of Turkey's current economic situation. The respective indicator has plunged by 49.2 points to minus 37.4 points - by far the lowest level of the indicator since the beginning of the survey.

Information concerning further indicators of the CEE region, the Eurozone, individual CEE countries covered by the analysis, or Austria can be found in the table at the end of the press release. The answers of all survey participants are taken into account for the calculation of the indicators for the CEE region, the Eurozone and Turkey. The answers of the Turkish survey participants are not taken into account for the calculation of the indicators for individual CEE countries and Austria, because their high participation share in the survey could cause significant biases in the survey results.

Survey Procedure and Methodology

The Financial Market Survey CEE is a survey carried out among financial market experts by the Centre for European Economic Research in Mannheim (ZEW) and Erste Group Bank AG, Vienna. The target of this survey is to develop indicators describing the economic conditions in Central and Eastern Europe (CEE) as well as in Austria.

The CEE region observed in the survey consists of Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia, Slovenia and, since October 2010, Turkey.

The financial experts are questioned on their evaluations of the current business situation, the medium-term prospects of the respective economies and their expectations as to the development of the inflation rate, the short- and long-term interest rates, exchange rates and stock prices on a six-month time horizon. The analysts' assessments reflect the qualitative direction of the estimated changes. The quarterly 'Financial Market Report CEE' contains the results for every Central and Eastern European country in detail.

Zentrum für Europäische Wirtschaftsforschung GmbH (ZEW)

ZEW is one of Germany's leading economic research institutes and enjoys a strong reputation throughout Europe. ZEW has distinguished itself by analysing internationally comparative issues in the European context and creating data bases important for scientific research, e.g. Mannheim Innovation Panel (MIP), ZEW Start-Up Panel. ZEW's key objectives are conducting economic research, providing economic policy advising and transferring knowledge. ZEW was founded in 1990 and currently employs a staff of 190, of which two thirds are researchers.

Research at ZEW:

International Finance and Financial Management; Labour Markets, Human Resources and Social Policy; Industrial Economics and International Management; Corporate Taxation and Public Finance; Environmental and Resource Economics, Environmental Management; Information and Communication Technologies; Growth and Business Cycles; Competition and Regulation, International Distribution and Redistribution.

www.zew.de / www.zew.eu

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