Central and Eastern Europe economic expectations improve

The Central and Eastern Europe economic expectations in April have improved by 24 points, reaching 32.1, according to the ZEW-Erste Group Bank Economic Sentiment Indicator for the CEE region.

The economic outlook for all individual nations in the CEE (Central and Eastern Europe, including Turkey) have also improved. The Czech Republic and Romania had the best improvements.

The ZEW-Erste Group Bank Economic Sentiment Indicator for CEE reflects market economists’ expectations for the region on a 6-month time horizon. The indicator is compiled monthly in combination with further financial market information provided by the Center for European Economic Research (ZEW) in Mannheim, Germany, with the support of Erste Group Bank in Vienna, Austria.

Why have Central and Eastern Europe economic expectations improved?

For April’s report, participants were also asked the reasons behind their economic expectations for Eastern and Central Europe. The most commonly cited reason for their optimistic outlook is the improving macroeconomic situation in the euro area, as well as growing global demand.

Central and Eastern Europe economic expectations
The Ukraine/Crimea crisis is hurting the Russian economy.

The main reason for pessimism in the crisis in Ukraine.

Russia’s annexation of Crimea and other social conflicts in Ukraine have triggered a capital flight of between $50 billion and $70 billion from Russia, i.e. investors are taking their money out of the country.

Economists have lowered their economic forecast for Russia, predicting probable zero % GDP growth for 2014, as well as rising inflation.

Current situation in CEE region

The current economic situation for Central and Eastern Europe has also improved significantly in April 2014, experts say. Its indicator now stands at (minus) -10.7, an improvement of 15.0 points.

Turkey displayed the greatest gain in its current economic situation, rising 38.0 points to 13.0, its highest level of the indicator since the end of 2013.

The report authors write, regarding Turkey’s improvement:

“The positive assessment is likely to be caused by the recent local elections in Turkey which took place on March, 30th. The victory of Prime Minister Erdogan’s party seems to have somewhat relieved the increased political uncertainty.”

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