Economic Expectations for Central and Eastern Europe Remain Optimistic

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

(PresseBox) ( Mannheim, )
The expectations of financial market experts for the economic development in Central and Eastern Europe have further improved in October. The CEE Economic Sentiment Indicator which is monthly calculated by the Centre for European Economic Research (ZEW), Mannheim, with support of Erste Group Bank, Vienna, climbs 12.1 points to 50.9 points in the current survey. Thus, the upswing that has started early this year continues. A clear majority of 54.7 percent of the survey participants believe in a recovery of the CEE business activity in the next six months. Only 3.8 percent are expecting a deterioration of the economic development. The indicators for Austria and the entire Eurozone developed positive in October as well. The business expectations for Austria gain 7.1 points reaching 51.1 points. The corresponding indicator for the Eurozone increases by 11.9 points to 56.6 points.

Nevertheless, the assessment of the current economic situation in the CEE region worsens. The respective balance drops 9.3 points to minus 56.6 points. The proportion of critical assessments increases by 9.4 percentage points to 58.5 percentages. Only 1.9 percent of the financial market experts evaluate the present state of the economy in the CEE region as good.

The balances for Austria and the Eurozone show a similar development in October. However, the analysts assess the economic situation there as less critical. After a 10.1 point decline, the balance for Austria reaches minus 34.1 points. In the Eurozone the corresponding balance falls 6.5 points to minus 43.4 points.

Regarding the financial experts' inflation expectations there is a clear tendency for the CEE region, Austria and the Eurozone. All balances soar in a double-digit increase and switch from negative to positive. This is likely to indicate rising inflation rates. However, an increasing majority of analysts predicts constant inflation rates for the next six months. These neutral assessments are not included in the calculation of the balance.

With an incremental stabilisation of the business activity in the Eurozone the polled experts seem to be reinforced believing in an upcoming increase of interest rates. The respective share of survey respondents increases by 25.8 percentage points to 45.8 percent. Nevertheless, the majority of the analysts (54.2 percent) still consider the current interest rate level as appropriate.

The changes in balances regarding the stock market indices for the CEE region (NTX), Austria (ATX) and for the Eurostoxx 50 vary a lot in the current survey. While the balance for the NTX gains 1.1 points up to 19.6 points, the expectations for the ATX fall 6.0 points to 12.5 points. The balance representing the prospects for the Eurostoxx 50 within a horizon of six months decreased the most by 16.5 points to 6.5 points.


The Sentiment Indicator for Croatia continues to improve in October. After climbing 11.7 points to 31.7 points, the indicator no longer takes the last position among the analysed CEE countries. However, in contrast to the last month the experts' assessment of Croatia's current economic situation worsens. The respective balance drops by 16.2 points to minus 61.3 points.

Regarding the development of the Croatian stock market in the coming six months the financial market experts remain optimistic. With a balance of 19.6 points the forecasts for the Croatian stock market index CROBEX are the second best in comparison to the other countries. As seen in the previous months, again the majority of the survey participants expect a devaluation of the Croatian currency with respect to the Euro in October.


The financial market experts evaluate Poland's economic development in the following six months as the most positive among the analysed CEE countries. Accordingly the business outlook indicator gains 7.6 points and reaches 46.0 points. Poland's current economic situation is also rated less critical compared to the other analysed countries. The respective balance decreases indeed by 16.8 points. Nevertheless, the realized score of minus 22.4 points is still the best among the analysed economies.

Regarding the Polish currency most polled experts anticipate an appreciation. The balance of the predictions concerning an appreciation and depreciation of the Zloty amounts 37.6 points.


The business expectations for Romania worsen in October by 4.5 points and equal a level of 25.5 points. That represents the weakest value in comparison. The assessment of the current economic situation in Romania turns out to be the most cautious as well. The corresponding balance falls 17.9 points to minus 70.8 points.

Regarding the Romanian stock market the participating analysts appear to be optimistic. The balance reflecting the development of the Romanian stock market index BET increases slightly by 1.2 points and obtains 20.0 points, the highest score in this category.


For the second time in a row the Slovakian business outlook indicator remains nearly unchanged at 36.1 points in October. Contrary to the previous month the evaluation of the current economic situation deteriorates considerably by 36.7 points to minus 61.3 points. Also the development of the Slovakian stock market index SAX is rather cautious evaluated. Ranking only 2.6 points the respective indicator remains on last position in the CEE country comparison.

Czech Republic

The economic expectations for the Czech Republic improve in October slightly by 2.4 points to 41.2 points, handing over the leading position to Poland. The analysts' evaluation of the current economic situation remains nearly unchanged at minus 37.3 points.

While the development of the Czech stock market has been assessed very optimistically last month, expectations in October deteriorate. The respective indicator for the Czech stock market index PX50 declines by 16.4 points to 4.7 points.

For the next six months the majority of experts expect an appreciation of the Czech currency with respect to the Euro.


The upswing of the economic outlook for Hungary continues in October. The respective indicator climbs 5.8 points to 36.6 points. However, the current economic situation in the country is still assessed critically with a corresponding balance of minus 69.8 points. Nevertheless, the balance is increasing as the only one among the CEE countries by 4.2 points and therefore hands over the last position in this category to Romania.

A clear majority of 81.8 percent of the financial market experts continues anticipating a reduction of the short term interest rates in Hungary in the next six months.

Special Question

The special question in October deals with the results of the recent G-20 Summit that took place on September 24 and 25, 2009 in Pittsburgh. 18 percent of the polled financial market experts state that their expectations have been met. 8 percent state that they are dissatisfied. 74 percent of the analysts consider the results of the summit as neutral.

The experts evaluate the taken decisions concerning financial regulation and reforms of international financial institutions as very important. However they criticise that the restoring lending issue has not been covered sufficiently.

In general, the experts do not agree upon the relevance of the outcomes of the G-20 Summit for the CEE region. 32 percent of the analysts consider the Summit as being relevant and 32 percent of the experts assess it as being irrelevant for the CEE region.

Survey Procedure and Methodology

The Financial Market Survey CEE is a survey carried out by ZEW Mannheim and the Erste Group Bank AG Vienna, among financial market experts and has been conducted monthly since May 2007. 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 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, the exchange rates and share 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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