The ZEW-Erste Group Bank Sentiment Indicator CEE that reflects the business outlook for Central and Eastern Europe (CEE) increases by 7.1 points to 59.1 points in January. 67.3 percent of the polled financial market experts expect the economic situation to improve in the region till mid of the year. The CEE Indicator is calculated monthly by the Centre for European Economic Research (ZEW), Mannheim, with support from the Erste Group Bank, Vienna. It reflects the assessment of the economic development for the CEE region on a six months time horizon.
In January the economic expectations improve for the Eurozone as well. They edge up by 6.7 points, reaching the 62.7 mark. However, the economic expectations for Austria decrease by 6.8 points to 55.7 points. The decline results mainly from the increased share of neutral evaluations that do not affect the balance of the sentiment indicator.
The assessment of the current economic situation in the CEE region denotes also a strong improvement in this month. The respective indicator climbs 13.1 points to minus 34.0 points. The balances for Austria and the Eurozone increase by 1.0 point to minus 22.2 points and by 5.4 points to minus 29.3 points, respectively.
In the January survey the inflation expectations for Austria and the entire Eurozone continue to rise. Almost 70 percent of the survey participants expect inflation rate increases in both countries/ regions within the next six months. On the contrary, the expectations concerning the development of the inflation rate in the CEE region as a whole differ considerably. 44 percent of the surveyed experts predict increasing and constant inflation respectively. There is no clear picture concerning the interest rate development in the Eurozone either. Equal shares of 49 percent of experts anticipate an interest rate raise by the ECB and constant interest rates in the forthcoming half year, respectively However, the expectations of the financial experts regarding the performance of the stock markets stay optimistic. In particular, the balance for the stock index in the CEE region (NTX) increases by 17.1 points to 58.6 points. This is the highest value among all analysed stock indices. 73.2 percent of the experts expect a positive development for the NTX in the next six months.
The economic expectations for Croatia improve significantly by 24.9 points to 60.1 points in January and abandon the last position in country comparison. Also the evaluation of the current economic situation changes for the better. The respective balance increases 10.3 points to minus 44.7 points. A depreciation of the Croatian Kuna against the Euro within the next six months appears increasingly implausible to the experts.
Similar to the development in the last month, the sentiment indicator for Poland rises slightly by 6.0 points to 56.1 points in January. The assessment of the current economic situation improves by 6.0 points as well to minus 4.1 points. That is still the best value in this category among all analysed countries. The majority of polled experts still consider the Polish currency to have the highest appreciation potential against the Euro in the next six months.
In a cross-country comparison the economic expectations for Romania gain the most this month. The respective indicator climbs 25.7 points to 64.4 points, now occupying the third best position. Also the assessment of the current economic situation in Romania improves significantly in comparison to last month. The respective balance gains 17.4 points to minus 58.6 points. 60.5 percent of the experts predict a lowering of the short-term interest rates by the Romanian National Bank within the next half year.
After the strong increase last month the sentiment indicator for Slovakia changes only slightly by 2.7 points to 61.7 points in January. Nevertheless, the assessment of the current economic situation shows a strong gain of 26.2 points to minus 25.0 points. The experts appear to be convinced about an increase of the inflation rate in the country within the coming six months. The respective indicator edges up by 11.5 points to 63.8 points.
The sentiment indicator for the Czech Republic reaches with an increase of 13.6 points to 68.0 points the best value among the analysed economies in January. 72 percent of the polled financial market experts expect a positive development of the economy in the forthcoming half year. Also the assessment of the current economic situation improves significantly gaining 13.7 points to minus 20.4 points. The predictions of an increasing inflation rate strengthen this month. The respective balance rises slightly to 62.6 points. Furthermore, the share of experts expecting an appreciation of the Czech currency against the Euro keeps growing.
Economic expectations for Hungary gain 25.2 points to 64.8 points in January. That constitutes the second best result in this category among the analysed CEE countries. However, the assessment of the current economic situation improves only moderately. The respective indicator reaches with minus 61.6 points the lowest value among the CEE economies. Furthermore Hungary is the only country the majority of analysts predict a falling inflation rate for.
The special question surveys the preferences of the financial market experts with regard to the optimal portfolio allocation in 2010. On average the analysts would invest 39 percent of their capital in bonds, 37 percent in stocks and 24 percent in other asset classes. The geographical allocation of the average stock portfolio would be the following: 30 percent stocks from the CEE region, 24 percent from the Eurozone, 23 percent from the USA and 23 percent from Asia. The CEE stock portfolio would contain mainly shares from Poland (23 percent) and from the Czech Republic (21 percent).
Survey Procedure and Methodology
The Financial Market Survey CEE is a survey conducted 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 have to evaluate the current business situation, the medium-term prospects of the respective economies, the development of the inflation rate, the short and long-term interest rates, the exchange rates and stock prices for the next six months. The analysts' assessments reflect the qualitative direction of the estimated changes. The CEE region, the Eurozone as well as the Czech Republic, Poland, Hungary, Slovakia, Croatia, Romania and Austria are among the analysed countries.
The monthly "Financial Market Report CEE" contains the results for every Central and Eastern European country in detail.
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