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报告摘要

CEEMEA Weekly Summary - 7 August 2013

Core Content

The CEEMEA Weekly report provides an economic outlook for the Central and Eastern Europe (CEE) region and other key countries in the region, including Russia, Ukraine, South Africa, and Turkey. It highlights the potential for monetary policy easing in Russia, a slow recovery in CEE, challenges in South Africa due to twin deficits, and the impact of political and economic developments in Egypt and Zimbabwe. Additionally, it discusses the effects of currency depreciation and fiscal policies on inflation and growth in Turkey and Ukraine.

Main Themes and Key Information

Russia: Stronger Arguments for Easing

Monetary Policy Outlook: The Central Bank of Russia (CBR) is expected to cut interest rates by 25bp this week, despite market expectations of a delay until September. This decision is driven by slowing inflation and the need to stimulate economic growth.
Inflation Trends: July consumer price inflation slowed to 6.5% y/y, below the CBR's tolerance level of 7% y/y. The bank has also adopted measures to boost rouble liquidity, including expanding eligible collateral and conducting auctions.
Economic Growth: The Russian economy is showing weak growth, with Q2 GDP growth likely to be around 2% y/y. The industrial sector remains sluggish, and the government is expected to provide more stimulus to push growth above 2.5–3% in H2 2013.
Structural Concerns: While monetary easing may offer temporary relief, structural reforms are necessary for long-term growth. The government's fiscal stimulus may not be enough to achieve the potential growth rate of 2.5–3% y/y.
Key Charts:
- Chart 1: Central bank policy rates
- Chart 2: CPI breakdown
- Chart 3: Weak fixed capital investment – the main reason for monetary stimulus
- Chart 4: GDP growth, retail sales and industrial production

Central and Eastern Europe: Nascent Recovery

Poland: Q2 GDP growth is expected to strengthen to 0.4% q/q and 0.7% y/y. The recovery is expected to continue in Q3, though it will be slow and dependent on external demand. Consumption is improving due to disinflation, but investment remains weak.
Hungary and Czech Republic: Both countries show weak industrial and retail performance. The Czech Republic's industrial output fell by 5.3% y/y in July, and retail sales declined by 1.1% y/y. A slow recovery is expected, with growth heavily reliant on external demand.
Key Charts:
- Chart 1: Polish economy bottoming out
- Chart 2: Cyclical recovery starting
- Chart 3: Stronger private consumption spending
- Chart 4: Investment slump persists
- Chart 5: Government keeping spending low
- Chart 6: Further gains in net trade

Ukraine: Temporary Current-Account Improvement

Current Account Deficit: Ukraine's current-account deficit for H1 2013 was USD -3.7bn, slightly better than expected. The improvement was largely due to reduced natural gas imports, not lower domestic consumption, as part of a negotiating tactic with Gazprom.
FX Reserves: FX reserves are expected to drop from USD 23.1bn to USD 18bn by year end, challenging the country's FX rate policy.
Capital Account: The capital account surplus increased to USD 5.9bn in H1 2013, driven by increased inflows of bonds, loans, and portfolio investments. However, the majority of these inflows are likely due to reinvestment by Ukrainian industrial groups.
Key Charts:
- Chart 1: Current account vs. capital account
- Chart 2: Current account composition (USD bn)

South Africa: Twin Deficits a Headache

Trade and Budget Deficits: South Africa's twin deficits (current-account and budget) are a significant risk. The trade deficit reached a record high of ZAR 76bn in H1 2013, and government revenue has softened while expenditure growth remains strong.
Economic Vulnerability: The country's vulnerability is heightened by global economic uncertainty and the potential for reduced capital flows. The twin deficits may worsen if the global and domestic situation deteriorates.
Rating Agencies: The global rating agencies have South Africa on negative watch, and the country's budget deficit targets are likely to be more challenging to achieve.

Turkey: Inflation and Policy Challenges

Inflation: Turkey's inflation reached 8.9% y/y in July, with core inflation at 6.1% y/y. The depreciation of the Turkish lira (TRY) is contributing to inflationary pressures.
Monetary Policy: The Central Bank of Turkey (CBRT) is expected to maintain a tight liquidity policy, keeping money-market rates close to the ceiling of the interest-rate corridor.
Economic Activity: Turkey's PMI reading for July was 49.8, suggesting a slowdown in economic activity. The government has cut interest rates, but this has not spurred private-sector credit growth due to the focus on public deficit financing.
Debt Roll-Over: The Turkish Treasury will hold bond and CPI-linker auctions to roll over TRY 11.1bn of maturing debt.

Egypt and Zimbabwe: Political and Economic Challenges

Egypt: The Central Bank of Egypt (CBE) cut interest rates by 50bp to support growth, but this may not stimulate private-sector credit due to the focus on public deficit financing. Political instability and loss of consumer and business confidence continue to hinder economic recovery.
Zimbabwe: President Mugabe won the election with 61% of the vote, and the opposition MDC has threatened to boycott government institutions. The political situation is key to Egypt's growth prospects, and the country continues to face a currency and funding crisis.

Summary of Key Points

Russia: Expected to cut rates this week, with a total of 75bp in cuts anticipated for H2 2013. The economy is struggling with weak growth and low capacity utilisation, but inflation is slowing.
Poland: Shows signs of a slow recovery, with GDP growth expected to improve slightly. The recovery is driven by external demand and weak domestic consumption.
Hungary and Czech Republic: Both show weak economic performance, with industrial and retail data indicating a slow rebound.
Ukraine: Current-account improvement is temporary, driven by reduced gas imports. FX reserves are expected to fall, and the capital account surplus is due to reinvestment.
South Africa: Twin deficits pose a significant risk, especially in the context of global economic uncertainty.
Turkey: Inflation remains high, and the CBRT is likely to maintain a tight monetary policy. Economic activity is slowing, and the depreciation of the lira is contributing to inflation.
Egypt: Rate cuts have not stimulated private-sector growth, and political instability remains a major obstacle.
Zimbabwe: Mugabe's re-election has led to market volatility, but the political situation may allow for a more cautious approach from Zanu-PF in the future.