CEE - Bond Markets Outlook

14 Octombrie 2011

RAIFFEISEN BANK S.A.

 

Highlights

• Poland – The outcome of the Polish parliamentary elections, i.e. a victory for the ruling pro-reform Civic Platform party, had some positive impact on LCY bonds and EUR/PLN. In the near term, the Polish market will remain dominated by global market sentiment, especially as we approach the EU and Eurozone summit on 23 October. The domestic macroeconomic data due out this week will provide some interesting hints about the scale and pace of the slowdown in the Polish economy, but the numbers are not likely to move the market.

• Hungary – Representatives of the rating agency S&P are currently on-site in Hungary, investigating the economic developments. In our view, Hungary does not deserve junk category from a macro-economic point of view, considering the relatively strict fiscal discipline. The question is how political risks will be taken to account in deciding on the country’s credit rating. Fitch has implicitly hinted so far that there will be no downgrade for Hungary, as the judgment on the country’s credit rating is primarily driven by macro developments.

• Czech Republic – Finance Minister Kalousek repeated that he was ready to take further measures to help keep next year’s budget deficit on target (3.5% of GDP) if the situation worsens. The Ministry worked under the assumption of 2.5% GDP growth next year. Kalousek admitted recently that this might be optimistic. The head of the central bank’s statistics department Holub said that the next CNB forecast due out in November would estimate GDP growth in 2012 below 2%.

• Romania – In September, consumer prices fell by 0.2% mom, while the annual inflation rate fell to 3.45% yoy, from 4.3% yoy in August. The decline in overall consumer prices was again the result of the drop in food prices (-1.2% mom), due to the plunge in volatile prices of fruits and vegetables (-7.8% mom). The short-term inflation outlook has improved substantially over the last five months as good agricultural output triggered a plunge in volatile food prices.

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