20140611-巴黎银行证券-CEEMEAnomics_24页_1mb

CEEMEA Weekly Summary - 11 June 2014

Core Content Overview

The CEEMEA Weekly report highlights the divergent economic and monetary policy trends across the region, emphasizing the contrast between robust growth in Turkey and Central Europe and sluggish performance in Russia and South Africa. The report also discusses the evolving monetary policy strategies in Central Europe, particularly in Poland, the Czech Republic, and Hungary, and the implications for inflation and economic stability.

Main Themes and Key Insights

1. Divergence in Growth and Policy Outlook

• Turkey and Central Europe: Showed robust economic activity in Q1 2014, driven by net exports and public spending.
• Russia and South Africa: Experienced weaker growth and economic challenges, with South Africa facing significant labor unrest and potential sovereign rating downgrades.
• Central Bank Responses: Vary significantly, with some adopting more proactive measures while others remain passive.

2. Monetary Policy Styles: Catenaccio vs. Tiki-Taka

• Catenaccio (Passive Policy): Characterized by infrequent use of standard monetary tools, such as interest rate adjustments. This style was historically more successful in keeping inflation close to targets in the Czech Republic and Poland.
• Tiki-Taka (Proactive Policy): Involves more frequent and unorthodox interventions, such as direct FX manipulation. This style is increasingly adopted in response to inflation volatility and external shocks.
• Hungary: Has seen greater inflation swings due to exchange rate volatility and frequent indirect tax changes, prompting a more active monetary policy.

3. Poland's CPI Inflation Outlook

• Short-Term Outlook: Inflation is expected to dip below zero in July 2014 due to falling food and energy prices, but this is likely to be short-lived.
• Headline Inflation: Could rise to 2.5% by mid-2015, driven by food price inflation.
• Monetary Policy Caution: The NBP is expected to avoid rate cuts in 2014 due to the risk of repeating past mistakes (e.g., the 2012 rate hike amid economic slowdown).

4. Czech Republic's Inflation Recovery

• CPI Inflation: Increased to 0.4% y/y in May 2014, up from near zero in previous months.
• FX Intervention: The CNB's direct FX policy helped weaken the koruna, boosting import prices and core inflation.
• Target Achievement: The Czech Republic is on track to reach its 2% CPI inflation target by year-end.

5. Hungary's Inflation and Policy Dilemma

• Deflationary Pressures: Continued to persist, with CPI inflation slightly below zero in May 2014.
• Monetary Easing: The NBH is cutting rates and boosting forint liquidity, but inflation projections suggest it may exceed the 3% target in 2015.
• Policy Uncertainty: The central bank may shift to a more proactive approach, but the risk of overreacting remains high.

6. South Africa's Economic and Political Challenges

• Weak Macroeconomic Data: Continued poor performance in fixed investment and manufacturing output.
• Platinum Strike: Ongoing labor disputes are hurting the economy, with no immediate resolution expected.
• Rating Outlook: S&P and Fitch are expected to review South Africa's ratings, with a risk of a one-notch downgrade.

7. Ukraine-Russia Relations

• Normalisation Efforts: Ongoing EU-brokered talks on gas payments are progressing, with both sides showing willingness to negotiate.
• Political Reconciliation: The return of the Russian ambassador to Kiev indicates improving political ties.

Key Data and Projections

• Poland's CPI Inflation:

  • May 2014: Expected to be 0.5% y/y.
  • July 2014: Could dip to -0.2% to -0.3% y/y due to food and energy price declines.
  • Mid-2015: Headline inflation may approach 2.5% as food prices rise.

• Turkey's GDP Growth:

  • Q1 2014: 4.3% y/y, in line with expectations.
  • 2014 Forecast: Revised to 3–3.5% due to continued growth and robust Q1 data.

• Central Bank Actions:

  • CNB (Czech Republic): 23 interest rate changes since 2004, with a focus on FX intervention.
  • NBH (Hungary): 66 interest rate changes since 2004, including significant rate cuts.
  • NBP (Poland): Maintains a passive stance, with limited rate cuts in 2014.

Conclusion

The CEEMEA region is experiencing a mix of economic performance and monetary policy approaches. Central Europe and Turkey are showing resilience and stronger growth, while South Africa and Russia are struggling with economic and political challenges. The shift from a passive (catenaccio) to a more proactive (tiki-taka) monetary policy style is evident, particularly in response to inflation volatility and external shocks. Poland, however, remains an outlier due to its cautious approach and the lingering effects of past policy errors. The report underscores the importance of monitoring inflation trends and economic data, especially as they relate to the region's monetary policy decisions and growth prospects.