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2018/06/14 / Erste Group Research

What is up in CEE? 2018Q2

There was still strong real GDP growth in 1Q18 in CEE, despite euro area weakening, but slowdown for FY2018 (to 4.1%) can be expected after last year's 4.7%. Recent inflation upticks in CEE may fade later this year as core inflation indices do not point to notable pressures in most countries. External trade positions may continue to worsen in CEE as the import bill is increased by strong domestic demand, while exports could be negatively affected by the deterioration in European sentiment indicators since the start of the year(Slovakia might be an exception, courtesy of the new Jaguar-Land Rover plant).

While many CEE governments used the window of opportunity to issue hard currency bonds recently, the international sentiment started to become less supportive as major central banks continue with tightening or exiting from quantitative easing. While economic fundamentals have not really worsened, most CEE FXFI markets were hit in 2Q18. Hungarian markets were hit the most, where the MNB is being tested by the markets (by pushing the EURHUF to multi-year highs and the 10Y bond yield increasing by around 100 basis points quarter-to-date) on how strongly it wants to stick to its easing bias. While the weakness of the Czech koruna and the Polish zloty may be temporary, the forint's trajectory is strongly dependent on the signals from the Hungarian central bank.

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General information

AuthorErste Group Research
Product nameCEE Economies Special Report
Topic in focusFX, Macro/ Fixed income
Economy in focusCroatia, Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia, Slovenia
Currency in focusCroatian Kuna, Czech Koruna, Euro, Hungarian Forint, Polish Zloty, Romanian Leu, Serbian dinar
Sector in focus-


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