The economic optimism for Central and Eastern Europe (CEE) continues to rise in April. This is signalled by a considerable increase of the CEE indicator by 9.9 points to now minus 12.5 points. It is the largest improvement since the indicator was implemented in Mai 2007. The CEE indicator is calculated on a monthly basis by the Centre for European Economic Research (ZEW), Mannheim, supported by Erste Bank der oesterreichischen Sparkassen, Vienna. The indicator shows the balance of positive and negative assessments of the economic outlook for Central and Eastern Europe over the next six months. The increasingly positive forecasts for the development of the CEE stock index and the expected inflation decrease also indicate a further improvement of the region’s economic sentiment.
The economic outlook brightens but the assessment of the current economic situation in Central and Eastern Europe in April remains unchanged at a balance of 40.0 points. Like in the previous months, the majority of the experts participating in the survey do not expect any change of the current economic situation in the region and therefore assess the situation as acceptable.
Among all considered countries, the economic outlook for Austria in April improved the most by 14.3 points and now stands at a value of minus 19.1 points. The current economic situation is mostly assessed positively with a slight decrease of the respective balance by 1.5 points to 39.0 points. Like in the previous month, neutral answers were predominant in both balances.
In April, the economic expectations for the Eurozone decrease slightly by 3.3 points to minus 34.7 points. 44.9 percent of all financial experts did not expect any change of the economic situation in the next six months. Just as many experts expect a worsening of the economic situation over this period. Only 10.2 percent of the survey participants expect an improvement. A clear majority of the participants (74 percent) assess the current situation in the Eurozone as acceptable. The respective balance is dominated by positive answers and increased by 6.2 points to a value of 18.0 points.
The financial experts’ forecasts on inflation have changed immensely in all surveyed countries compared to the previous month. In April, a considerable shift in the inflation forecasts in favour of falling inflation rates took place in the CEE region and the Eurozone. The balance for the CEE region decreased by minus 30.4 points to minus 12.0 points. Albeit the inflation rate in the Eurozone in this month reached its highest level since 1999 at 3.5 percent and the ECB rated the current danger of inflation higher, the experts expect a falling inflation rate in the next six months. This is shown in the balance for the Eurozone which decreased by 18.0 points and now stands at a negative value of minus 4.0 points.
The decreasing fear of inflation is in accordance with the expectations of financial experts from the CEE countries regarding the development of short-term interest rates in the Eurozone. The respective balance reached minus 34.8 points. Despite the increase of the balance of 9.0 points in April, considerably more experts expect an interest rate cut rather than an interest rate rise by the ECB in the next six months.
Unlike March, the forecasts for the stock markets in April are characterised by a distinct optimism. The increase of the balances is double-digit in all countries, like in the February survey. The clear majority of survey participants forecast increasing stock indices in the next six months. 73.3 percent of the experts expect an increase of the CEE stock index (NTX). Only 15.6 percent expect a decrease of the NTX. Therefore, the NTX-balance improves by 32.0 points and achieves a value of 57.7 points. By that the NTX-balance is ahead of all surveyed stock indices.
The expectations regarding currency exchange rates indicate an appreciation of most countries’ currencies compared to the Euro. The majority of experts only expect currency devaluation for the koruna in the Czech Republic.
This month’s special question evaluates how the experts would weight the stocks and bonds in a portfolio over the next six months; how the regions Europe, CEE, USA and Asia should be represented in this portfolio; and which CEE countries should be represented by which percentage. On average, the financial experts would invest 47 percent of their funds in stocks and 53 percent in fixed income securities. Regarding the allocation of the stock portfolio to regions, the experts would invest 30 percent each in European and CEE stocks, 21 percent in US-American stocks and 19 percent in Asian stocks. Poland would get the biggest part (26 percent) of the stock investment in the CEE countries, followed by the Czech Republic (18 percent). The experts would invest the smallest part of their funds in Serbia and Slovakia (less than 6 percent).
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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