CEE Qu 3-08.Qxd

Analysis of the UniCredit Group CEE Research Network CEE Quarterly 03 2008 For authors see last page Imprint Disclaimer Published by UniCredit Group/Bank Austria Creditanstalt Aktiengesellschaft This document (the “Document”) has been prepared by UniCredito Italiano S.p.A. and its http://www.unicreditgroup.eu controlled companies1 (collectively the “UniCredit Group”). The Document is for information http://www.bankaustria.at purposes only and is not intended as (i) an offer, or solicitation of an offer, to sell or to buy any financial instrument and/or (ii) a professional advice in relation to any investment decision. Edited by CEE Research Department The Document is being distributed by electronic and ordinary mail to professional investors and [email protected] may not be redistributed, reproduced, disclosed or published in whole or in part. Information, Bernhard Sinhuber, Phone +43 (0)50505-41964 opinions, estimates and forecasts contained herein have been obtained from or are based upon sources believed by the UniCredit Group to be reliable but no representation or warranty, Produced by Bank Austria Identity & Communications Department, express or implied, is made and no responsibility, liability and/or indemnification obligation shall Editorial Desk ([email protected]), be borne by the UniCredit Group vis-à-vis any recipient of the present Document and/or any Phone +43 (0)50505-56141 third party as to the accuracy, completeness and/or correctness of any information contained in the Document. The UniCredit Group is involved in several businesses and transactions that may Printed by Holzhausen relate directly or indirectly to the content of the Document. Accordingly, the UniCredit Group may hold a position or act as market maker in any financial instrument mentioned in the Document. Layout by Skibar Grafik-Design Information, which is not reflected in the Document, may therefore be available to persons connected with the UniCredit Group. The Document has been approved for distribution in UK by Closing Date: 18th July 2008 the London branch of UniCredit Banca Mobiliare S.p.A., regulated by the FSA for the conduct of investment business in the UK. It has not been approved for distribution to or for the use of private customers, as defined by the rules of the FSA. The Document may not be distributed in USA, Canada, Japan or Australia. 1) Including Koc Financial Service A.S., a joint venture established pursuant to the laws of Turkey, of which UniCredit Italiano S.p.A. has a 50 % shareholding. The definition of “control” is pursuant to Italian laws. U2 I CEE Quarterly 03/2008 Contents 2 Regional Scenario 6 EU Members 6 Bulgaria 10 Czech Republic 14 Estonia 16 Hungary 20 Latvia 22 Lithuania 24 Poland 28 Romania 32 Slovakia 36 Slovenia 38 EU Candidates and Other Countries 38 Croatia 42 Turkey 46 Bosnia and Herzegovina 48 Kazakhstan 50 Russia 54 Serbia 56 Ukraine 58 Annex 58 Country ratings – foreign currency long term debt 58 Country ceiling ratings scale 59 Credit Defaults Swaps 59 Money market interest rates 59 Exchange rates – ECB methodology 60 Banking network 60 UniCredit Group CEE banking network – Headquarters CEE Quarterly 03/2008 I 1 CEE Quarterly Regional Scenario Regional outlook 2008–2009 Real GDP Inflation Interest rate Exchange rate Current account/ Fiscal Balance/ eop. eop. eop. GDP GDP 2008 2009 2008 2009 2007 2008 2009 2007 2008 2009 2008 2009 2008 2009 Central Europe Czech Rep. 4.3 4.0 5.7 2.8 3.50 4.00 4.00 26.6 25.7 25.5 –3.7 –3.8 –2.3 –2.9 Hungary 2.7 3.3 5.6 3.5 7.50 8.50 7.00 253.4 238.0 232.0 –4.4 –4.1 –3.6 –3.2 Poland 5.2 4.4 4.2 3.8 5.00 6.25 5.75 3.58 3.45 3.53 –4.5 –4.9 –2.5 –2.3 Slovakia 7.7 6.0 4.3 4.4 4.25 4.25 ECB 33.6 30.1 EURO –4.6 –4.0 –2.0 –1.7 Slovenia 4.4 4.2 6.4 4.6 ECB ECB ECB EURO EURO EURO –5.1 –5.0 –0.3 –0.3 Baltics & SEE Estonia 0.1 2.7 8.0 6.0 7.2 5.7 5.1 15.65 15.65 15.65 –11.3 –12.7 –0.7 0.0 Latvia 2.0 1.6 12.0 7.0 6.0 5.5 5.0 0.70 0.70 0.70 –15.5 –13.0 0.1 0.2 Lithuania 4.7 4.4 9.9 5.9 7.2 5.0 4.6 3.45 3.45 3.45 –11.9 –11.2 –0.9 –0.9 Bosnia–H. 5.8 5.0 5.7 4.1 – – – 1.96 1.96 1.96 –15.7 –14.2 –0.5 –1.8 Bulgaria 6.0 4.8 8.9 6.8 4.7 5.2 5.0 1.96 1.96 1.96 –20.2 –17.5 3.5 2.5 Croatia 4.0 3.9 5.0 3.2 6.7 5.7 5.3 7.33 7.28 7.28 –9.9 –9.1 –1.4 –1.7 Romania 6.8 5.5 6.8 5.0 7.50 10.00 9.00 3.61 3.58 3.66 –14.2 –13.5 –2.5 –2.9 Serbia 6.2 5.5 10.8 7.7 10.0 17.5 13.0 79.2 78.0 77.5 –16.3 –13.8 –0.6 –0.9 EU Candidates and other Countries Kazakhstan 4.6 6.1 10.5 8.8 12.35 7.00 7.50 177.2 175.5 170.8 3.2 0.0 –1.0 –1.0 Russia 7.5 6.6 13.0 11.0 6.82 7.40 7.30 35.9 34.1 32.9 7.0 4.4 7.0 5.0 Turkey 4.2 5.0 11.0 7.1 15.75 16.75 16.25 1.71 1.92 2.01 –6.3 –6.1 –1.8 –1.3 Ukraine 5.8 4.5 20.4 9.0 8.0 8.3 6.8 7.42 7.18 7.28 –8.4 –8.7 –1.4 –3.0 Source: UniCredit Group CEE Research Network. Global risks testing Central and Eastern European Consumption is fuelled by rising household incomes and declining un- economies employment, although high inflationary pressure and tighter monetary Low economic growth in the US and the eurozone, strong concerns conditions are resulting in moderation. Moreover, households in the about inflation, high lolatility in financial markets and a general repric- region are now coping with more stretched balance sheets than in the ing of risk are the main characteristics of the global environment. past because they have increasingly been financing their consumption with debt, making them more sensitive to potential shocks. Q1 GDP growth settled at 2.5 % yoy in the US and at 2.1 % yoy in the eurozone, and expectations point to a further slowdown, with 1.4 % and Even though the cycle peaked from 2006 to 2007 and despite credit 1.7 % growth for 2008 as a whole, respectively, and 2.0 % and 1.6 % for tightening, prospects for investment remain relatively positive thanks 2009. Oil prices have doubled this year as a result of strong demand and to fairly robust business activity and a number of infrastructure pro- clear constraints in terms of supply, and food prices are peaking due to jects financed by structural funds (in EU member countries) or invest- structural rather than temporary factors. With concerns mostly focused on ment and growth funds (in former CIS countries). Lower growth levels growth, proactive monetary policies have led to rapid declines in interest in the eurozone and rising production costs will be reflected in a cer- rates in the US, accompanied by direct fiscal interventions. Other central tain amount of pressure on the export performance of CEE countries. banks, including the ECB, are more concerned about inflation, reacting to Foreign direct investments (FDI) and M&A deals could also be affected the new environment with higher interest rates. In less than a year, stock by global uncertainty. However, the CEE region still remains competitive markets have lost 30 % of their value in Europe and 15 % in the US. The and selected industries might even benefit from decisions by interna- repricing of risk at the international level is also apparent: CDS spreads tional companies to maximise the return on their past delocalisation have doubled or tripled since July 2007, with several rounds of rebounds. strategies. Oil and raw material prices remain supportive for former CIS countries, but there is still the risk that a reversal of the current trend The region still appears to be resilient … would harm these countries. The usual growth drivers remain constant in CEE, and we continue to forecast an average yearly growth of 4.6 % in Central Europe, 5.1 % in … but the international environment reveals long- SEE and the Baltics and 6.0 % in broader Europe in the period from term weaknesses 2008 to 2010. It is very clear, however, that vulnerabilities exist. In recent years, most 2 I CEE Quarterly 03/2008 countries in the region have relied on external savings to finance their Hungary remains the country with the weakest macroeconomic envi- growth. Rising current account deficits were financed by foreign direct ronment in Central Europe and the most sensitive to deterioration in investment, but also by external debt. The banking sector has also the global environment. Despite a tense political scene, the real econo- played a role, with strong lending growth – one of the main drivers of my is slowly crawling out of its slump.

Load more