A chink of light in the gloom

By bne IntelliNews February 4, 2009

bne -

There's little in the way of good news at the moment, so forgive bne when it finds a chink of light in the enveloping gloom and brings it to people's attention.

January's survey by the Centre for European Economic Research in Mannheim (ZEW) and Erste Group Bank in Vienna, released February 2, found that the economic expectations of the financial market experts polled had improved considerably for all the Central and Eastern European countries, except Hungary and Romania.

The CEE indicator that measures the economic expectations of the analysts on a six-month time horizon increased significantly by 15.0 points in the latest survey conducted between January 5 and 19 to minus 49.1 points. "The economic prospects for the CEE region have improved for the first time since the aggravation of the financial crisis in September," the survey's authors concluded.

That said, the assessment by the experts of the current economic situation, perhaps not surprisingly, worsened in January. More or less no financial expert considered the current economic situation in the CEE region to be "good;" instead, 57.4% of the survey participants reckoned the present circumstances in CEE were "bad." Regarding the Eurozone, the picture was even worse - nearly 65% of the analysts assessed the current economic situation in the Eurozone to be "bad." However, like the CEE region, the Eurozone did see the indicator over the six-month timeline increase notably, by 7.2 points to minus 42.0 points.

Second-half recovery

Analysts' economic forecasts for the Czech Republic, Poland and Slovakia were all characterised by a growing optimism. "One possible cause for the improved forecasts is the implementation of economic stimulus packages by governments worldwide, including Poland," surmised the report.

About 85% of those polled are counting on a further decline in inflationary risks in the Czech Republic, Poland and Slovakia. Nonetheless, the share of the experts anticipating constant or even increasing inflation rates on a six-month horizon has grown slightly. "Presumably, this result is linked to the recovery of the economic expectations for the second-half of 2009," the report said.

Analysts increasingly anticipate a further decline of short- as well as long-term interest rates for the three states. Around 80% of the respondents assume that the respective central banks (in the case of Slovakia the European Central Bank) will stick to their policy of interest rate cuts in the coming half year. On balance, the expectations of analysts with regard to the stock markets of the three countries remain positive in January. The indicators for the Czech stock index PX 50 and the Polish index WIG now stand at 23.4 points and 25.1 points respectively, the highest values in this category among the analysed CEE states.

The region's bleak spots remain Hungary, Romania and Croatia. "At the beginning of the new year, the financial experts take a more cautious stance at the current economic conditions in Hungary, Romania and Croatia.

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