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Cautious Economic Outlook for Central and Eastern Europe
ZEW-Erste Group Bank Sentiment Indicator for Central and Eastern Europe (CEE)
The economic expectations for the Eurozone decrease in the current survey by 7.3 points to 13.1 points. However, the economic outlook for Austria improves by 5.1 points to 24.5 points which is the only positive change in this category in this month.
In July, the financial market experts are more optimistic than in the previous month concerning the assessment of the current business cycle in the CEE region, in the Eurozone and in Austria.
The respective indicator reflecting the evaluation of the current Press Release economic situation in the CEE region increases by 9.6 points to minus 13.6 points. The relevant indicator for Austria rises by 3.2 points to minus 2.2 points. The assessment of the current economic situation in the Eurozone increases by 17.8 points to minus 20.8 points.
The financial market experts estimate smaller inflation risks on a time horizon of six months in July for the CEE region, Austria and the Eurozone compared to the previous month. More than half of the survey's participants prognosticate in the current survey unchanging inflation rates.
The predictions concerning the shortterm interest rates for the Eurozone only change marginally in the current survey. The respective indicator declines by 1.4 points to 38.6 points. The majority of financial market analysts continue to foresee unchanging shortterm interest rate in the Eurozone.
The indicators which reflect the expected development of the stock market indices for the CEEregion (NTX), Austria (ATX) and the Eurostoxx 50 for the next six months demonstrate doubledigit increases in July. The relevant balances reach 24.4 points for the NTX, 32.5 points for the ATX and 24.9 points for the Eurostoxx 50.
After the significant decline of the economic expectations in Croatia in the previous month the respective indicator only decreases slightly by 1.2 points to 4.6 points in July. The assessment of the current business situation in the country improves significantly. The relevant indicator rises by 10.2 points to minus 34.0 points. The expectations concerning the stock market indices recover in this month's survey as the respective balance denotes the strongest increase in country comparison of 19.9 points and thus reaches 17.1 points. More than 40 percent of the experts believe that a depreciation of the Kuna is possible.
The economic expectation for Poland decrease by 5.0 points to 18.0 points. The assessment of the current economic situation declines marginally by 1.3 points to 6.0 points and defends its leading position with the only positive value in this category. 62.0 percent of the participants prognosticate an appreciation of the Polish currency Zloty against the Euro within the next six month.
The economic expectations for Romania decrease by 32.0 points to minus 6.3 points in July. This is the strongest decline in this category in country comparison. The evaluation of the current economic situation also worsens this month. The relevant indicator reaches a balance of minus 71.4 points and thus takes up the last place in this category compared to all the other analysed countries. In contrast to the prediction of the previous month the majority of analysts foresee an appreciation of the Romanian currency against the Euro within the next six months. The respective balance increases by 28.4 points to 15.6 points.
The economic expectations for Slovakia decrease by 7.1 points to 22.2 points in the current survey. The evaluation of the current situation in the country is also more cautious compared to June. The relevant balance declines by 5.8 points to minus 17.8 points. Nevertheless, the experts estimate the inflation risk in Slovakia to be smaller than in the previous month. The respective balance decreases by 18.2 points to 37.9 points.
Even though the indicator reflecting the economic outlook for the Czech Republic decreases by 9.6 points to 28.5 points the Czech Republic remains at the leading position among the analysed CEE countries in this category. The financial market experts are in discord concerning the appraisal of the current economic situation in the Czech Republic. With a balance of minus 0.1 points the Czech Republic reaches the second best value in country comparison though the share of positive and negative assessments are nearly the same. However, 63.3 percent of the analysts assess the current economic situation to be acceptable. In July, the share of experts who predict an increasing inflation rate on a six months time horizon decreases compared to the previous month. Nevertheless, the respective indicator continues to reach with 46.9 points the highest value among all the analysed economies. The balance which reflects the exchange rate prognosis for the Czech Koruna against the Euro increases by 5.0 points and reaches with 45.0 points the highest value in this category.
The economic expectations for Hungary decrease in this month's survey by 23.7 points to the 9.6 points mark. The evaluation of the current business cycle however improves by 8.6 points to minus 50.0 points. Among all the other analysed countries the experts expect decreasing inflation risks within the next six months for Hungary only. The relevant balance reaches a value of minus 16.7 points.
This month's special question deals with the possible entry of Turkey into the EU. The majority of analysts are of the opinion that Turkey currently does not fulfil the political criteria necessary for an EU accession by far. In contrast to the political criteria the financial market experts evaluate that Turkey has fulfilled the economic requirements already. According to the opinion of the participants the major challenge for the Turkish government lies in the protection of minorities. 80 percent of the analysts assess this requirement to be unaccomplished. Nevertheless, the participants also believe that Turkey has a functioning and competitive market economy. 56 percent of the experts advocate for a privileged partnership between the EU and Turkey instead of granting full EUmembership.
Survey Procedure and Methodology
The Financial Market Survey CEE is a survey carried out among financial market experts by the Centre for European Economic Research in Mannheim (ZEW) and the Erste Group Bank AG Vienna. The target of this survey is to develop indicators describing the economic conditions in Central and Eastern Europe (CEE) as well as in Austria.
The CEE region observed in the survey consists of Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia and Slovenia.
The financial experts are questioned on their evaluations of the current business situation, the mediumterm prospects of the respective economies and their expectations as to the development of the inflation rate, the short- and longterm interest rates, the exchange rates and stock prices on a six month time horizon.
The analysts' assessments reflect the qualitative direction of the estimated changes.
Among the analysed economies are the CEE region, the Eurozone as well as the Czech Republic, Poland, Hungary, Slovakia, Croatia, Romania and Austria.
The monthly 'Financial Market Report CEE' contains the results for every Central and Eastern European country in detail.
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