Demetrios Efstathiou is not optimistic on economic growth
for countries in CEE but still believes it will be better than
last years, driven by a rebound in Germany and better
domestic contexts for some of the countries.
He expects Turkey, which he sees growing by 4.1%, to be the
champion of growth and sees Polands gross domestic
product expanding by 1.7% and Romanias by 1.6%.
The Czech Republic is expected to grow by 0.5% and Slovakia
by 1% whereas Slovenia is seen shrinking by 1.5% and Croatia by
The Romanian leu has some advantages over other currencies
in the region, Efstathiou told Emerging Markets.
We favor the RON because of the entry into the
JPMorgan local currency bond index, he said.
There will be strong demand for local Romanian bonds
by emerging markets real money funds. We think this will be
good for the RON.
The RON was beginning to appreciate before the process of
inclusion in the JPMorgan index, which is due to last 3 months,
started on March 1.
We also like the Polish zloty, Efstathiou
FORINT QUESTION MARK
On Wednesday, the Polish National Bank sent the zloty
tumbling against the euro after it slashed interest rates by
half a percentage point to a record low of 3.25%, a sharper cut
than most in the market had expected; some analysts had
predicted a reduction of just a quarter of a percentage point
while others believed the bank would stand pat.
Efstathiou said there was a big question mark about
the forint, echoing other analysts views that the
arrival of former Economy Minister Gyorgy Matolcsy as the head of the countrys central
bank, replacing Andras Simor, could be a negative
for the currency.
There is very big unpredictability in policy,
We have unpredictability in policy with [Prime
Minister Viktor] Orban in government and we used to have
predictability in policy with the central bank under Simor, but
now we have unpredictability in policy at the central bank as
well, which makes Hungary a very risky country to be involved
in right now.
Despite the better prospects for growth in Turkey, the Turkish
lira is likely to weaken over the year as the current account
deficit widens, said Efstathiou, who expects the TRY to
depreciate between 3 and 5 percentage points against a
euro/dollar basket by the end of the year.
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