The financial market experts that are asked about their economic expectations for the CEE region in a monthly survey conducted by the ZEW, the Centre for European Economic Research, Mannheim, supported by Erste Bank der oesterreichischen Sparkassen, Vienna, are increasingly pessimistic. The sentiment indicator has decreased in November and now stands at -17.7 points. The experts' assessment of the current economic situation for Central and Eastern Europe is also lower compared to the previous month's survey but is still predominantly positive. The survey participants attest the Austrian economy to be in a good state, too, but economic expectations have declined markedly.
The ZEW-Erste Bank Sentiment Indicator CEE that gives the balance of positive and negative assessments for the economic development in CEE countries within the next six months has decreased in November again by 6.3 points. The pessimism of the financial market experts can now be seen relatively clearly with a balance of -17.7 points. The share of experts expecting a worsening of the economic development in the next six months for the countries of Central and Eastern Europe has increased at the expense of the share of survey participants with neutral forecasts on economic development. However, the majority of experts, 62.7 percent, does not expect a change of the economic development. The assessment of the current economic situation still is mostly positive. However, the balance has decreased by 7.2 points and now shows a level of 51 points.
For Austria, the economic expectations have declined markedly. The respective balance has decreased by 14.5 points and now shows a level of -21.3 points. The stabilisation that seemed to be on the way in the October survey has not continued. On the contrary, the balance reached a new minimum value. The experts still evaluate the economic situation in Austria as good. The balance has decreased slightly and shows 62.5 points compared to 65.2 points in the previous month's survey.
The financial market experts expect higher inflation risks accompanying the worsening forecasts of the business cycle. For Austria as well as for the CEE region, the survey participants expect higher inflation rates within the next six months. Both balances have increased; for Austria by 3.2 points and for Central and Eastern Europe markedly by 16.8 points.
The respondents' expectations do not seem to reflect the view that the forecasted rising inflation risks for Austria and the euro area as a whole are met by monetary policy actions in the middle term. The financial market experts forecast rising short-term interest rates (balance: 6.0 points) but the projection is much less pronounced compared to the October survey. For the Central and Eastern European countries, the experts do not expect a homogenous development of the short- and long-term interest rates because the economies are too different.
The experts' expectations with regard to the stock market development have declined markedly this month. For the ATX, the share of experts forecasting a rising stock market index has decreased by 20.9 percentage points whereas the share expecting a decrease of stock market prices has increased by 4.3 percentage points. The balance only reaches 12.3 points in the November survey. The balance of the NTX has decreased even more clearly (-33.3 points) than that of the ATX but from a higher level. Therefore, the financial market experts still expect a rising stock market index for the CEE region in the next six months (balance: 28.6 points). The more pessimistic expectations with regard to the stock market development compared to the previous month's survey concern the stock market indices of all considered CEE countries.
The special question in November deals with the competitive advantages of the CEE region. The experts evaluate the economies of the Czech Republic, Slovakia and Slovenia to be more competitive than the CEE region as a whole. The survey respondents attest Bulgaria, Croatia, Romania and Hungary an average competitiveness. Especially Serbia gets lower grades with regard to the comparative advantages within the CEE region. The important variables influencing the competitiveness from the experts' point of view are the human capital endowment, the productivity and the infrastructure.
The Financial Market Survey CEE is a survey carried out by ZEW Mannheim and Erste Bank der oesterreichischen Sparkassen AG Vienna, among financial market experts and has been conducted monthly since May 2007. It offers insights into the experts' assessment of the current economic situation and their expectations for Central and Eastern Europe, Austria and the Eurozone for the next six months concerning the general economic situation, inflation rates, interest rates, exchange rates and stock market indices. The CEE region observed in the survey consists of Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia and Slovenia.
The indicators reflect the difference between the percentage of analysts who are optimistic and the percentage of analysts who are pessimistic. The possible outcome of the balance lies between -100 and +100 points. Positive values of the balance indicate that the number of participants expecting a rise in the respective variable outweighs the number of participants with negative expectations.
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