20140123-巴黎银行证券-CEEMEAnomics_21页_1mb

CEEMEA Weekly Summary - 22 January 2014

Core Content

This summary outlines the economic and political developments in Central and Eastern Europe, the Middle East, and Central Asia (CEEMEA) for the week of 22 January 2014, focusing on inflation trends, central bank policies, and labor market activities in key countries like Poland, Hungary, and South Africa.

Main Themes and Key Countries

Turkey

• The CBRT (Central Bank of the Republic of Turkey) increased interbank rates to 9% on "additional lending days," which is a more subtle way of hiking rates without officially raising them.
• This move was more hawkish than expected, but the tightening is convoluted and incremental, potentially leading to less impact on restoring confidence in TRY-denominated assets.
• The CBRT's inflation report next week will provide further clarity on its monetary policy stance.

Poland

• Inflation forecasts for 2014 have been cut to 1.5% average and 1.8% year-end, due to subdued inflationary pressure.
• CPI inflation in late 2013 fell below the 1% mark, with the disinflationary process being broad-based.
• The NBP (National Bank of Poland) is expected to avoid rate hikes in 2014, as inflation remains below its target.
• Industrial production in December rose 6.6% y/y, but energy output fell nearly 10% y/y, and construction output was a key driver of growth.
• Wage growth and credit expansion are expected to be modest, with core inflation likely to remain around 1%.
• Higher excise duties on spirits and tobacco will add 0.4–0.5pp to CPI inflation in early 2014.
• The output gap is still wide, and economic growth is expected to be modest compared to potential, with actual GDP growth forecasted to be above 3% y/y in 2014.

Hungary

• Hungary is experiencing an economic boom, with GDP growth forecasted at 2.5–3.0% y/y for 2014.
• The NBH (National Bank of Hungary) has cut rates to 2.85%, with further reductions expected to 2.50% in Q2 2014.
• Investment and consumption have rebounded, driven by growth-friendly policies and EU structural funds.
• However, monetary easing is seen as excessive, increasing inflation risks beyond late 2014.
• Core inflation has been accelerating, and the real interest rate is already negative when deflated by core inflation.
• The NBH is expected to tighten policy in early 2015 to prevent inflation from exceeding the 3% target.

South Africa

• Headline inflation in December rose to 5.4% y/y, up from 5.3% in November, with core inflation remaining at 5.3% y/y.
• The ZAR has weakened significantly, losing 4% vs. USD year to date, and this is feeding into inflation.
• The SARB (South African Reserve Bank) is facing a dilemma, as ZAR weakness and core price pressures may force rate hikes before year end.
• Inflation is expected to hover close to the 6% target in H1 2014, with CPI inflation potentially reaching 6.0% by end of H1.
• Platinum miners are set to strike starting on Thursday, with the AMCU (Association of Mineworkers and Construction Union) demanding a minimum wage of ZAR 12,500, which is double the current level.
• The AMCU is using the platinum strike as a strategy to displace the NUM (National Union of Mineworkers) in the gold sector.
• The SARB is likely to delay rate hikes until end Q3 2014, due to weak domestic economic conditions.
• Local rate moves have lagged behind the ZAR's depreciation, but the market is pricing in a 50bp rate hike by July.

Key Economic Indicators and Forecasts

Key Political Developments

• The AMCU has called a sector-wide strike in the platinum sector, with 10,000 miners voting in Rustenburg.
• The AMCU is also planning unprotected strikes in the gold sector, targeting mines like Harmony Gold and Sibanye Gold.
• The Ipsos poll indicates that lower voter turnout is beneficial for the ANC.
• The DA (Democratic Alliance) may need to support affirmative action to attract the emerging middle class.

Summary of Inflation and Monetary Policy Outlook

• Poland: Inflation remains subdued, with no immediate need for rate hikes. The first is expected in 2015.
• Hungary: Despite a booming economy, the NBH continues to ease rates, which may lead to inflationary pressures in 2015.
• South Africa: Inflation is rising, with the ZAR's weakness playing a key role. The SARB is expected to delay rate hikes until end Q3.

Disclaimer

This analysis is produced by BNP Paribas Cadiz Securities (Pty) Ltd and has been reviewed, but not amended, by BNP Paribas. BNP Paribas holds an indirect 60% stake in BNP Paribas Cadiz Securities. This analysis does not contain investment research recommendations.