CEE Weekly

Issue 26/2015

3 July 2015

June PMI data (points)

Highlights

58

Uncertainties regarding the outcome of the Greek referendum next Sunday the
latest polls suggest a neck-and-neck race weighed on most CE/SEE local financial markets during the week. Thereby, the allegedly most exposed markets
to Greek event risks in light of trade and banking sector exposures suffered the
most. That being said, Romanian LCY bonds lost more than CE peers and should
continue to do so in case of a No vote in Greece. In such a case, the possibil-

56
54
52
50
48
46
CZ

PL

HU

PMI June 2015

RU

TR

PMI May 2015

PMI April 2015

Source: Bloomberg, RBI/Raiffeisen RESEARCH

Market snapshot
curr.* Sep-15 Dec-15 Mar-16
Poland
EUR/PLN
Key rate
10y bond
Hungary

4.19
1.50
3.2

4.15
1.50
3.4

4.10
1.50
3.6

4.10
1.50
3.8

10y bond
Romania
Key
rate
EUR/RON
10y bond
Croatia

1.3

1.0

1.2

1.1

ity of the Grexit scenario would increase substantially and should trigger a selloff on other local financial markets in the CEE region as well (Russia likely better shielded). In case of Greek voters would accept the reform proposals with a
Yes vote, local debt and FX markets could see a temporary recovery, whilst
Eu- robonds are likely to rather enter a relative stagnation phase with spreads
on many CEE sovereigns remaining fairly tight as thinner liquidity in summer
would impact trading activity. In the longer term, though, the approaching Fed
lift-off which we continue to expect in September should exert upward
pressure on bond yields and EUR/LCY rates.
In Ukraine the bond prices jumped on the news that Ukraines finance minister
would join debt negotiations next week. Actually the news should be positively

counteracting the danger of debt moratorium since it would be unthinkable for

Ukraine to begin negotiations by defaulting on Eurobond debt. As a result we see
the latest development as highly welcome step which could lead to orderly resoluEUR/HUF
314.1
310
315
315
tion of the debt situation impasse in Ukraine. Meanwhile we foresee difficult talks
Key rate
1.50
1.30 1.30
1.30
10y bond
3.9
4.4
4.5
4.6
ahead as the exclusion of USD 3 bn owed to Russia from commercial Eurobond
Czech Rep.
restructuring means that Ukraine would have more merits to insist on moderate 10EUR/CZK
27.2
27.5 27.4
27.4
15% principal debt reduction to help it meet, partially or in full, its IMF targets.
Key rate
0.05
0.05 0.05
0.05

USD/RUB
Key rate
8y bond
Turkey
USD/TRY
Key rate
10y bond
EUR/USD

1.75
4.45
4.4

1.75
4.40
4.6

7.60
3.6

7.65
3.5

7.70
3.5

7.68
3.5

55.6
55.0 60.0
11.50 10.50 10.00
n.a.
10.3
9.8

57.0
9.00
9.5

2.69
7.50
9.2
1.11

2.75
7.50
10.0
1.10

2.70
7.50
11.0
1.05

2.70
7.75
11.5
1.05

TR

DE,
EUR/USD

-75

Gains

1.75
4.45
4.2

Losses

EUR/HRK
5y bond
Russia

1.75
4.48
4.3

Financial analysts: Gintaras Shlizhyus, RBI Vienna

HU untilCZ
RO 2015
RU*
Expected changes PL
from today
September

Currencies per 1 EUR

* prices as of 3 July 2015, 10:58 a.m. CET
Source: Thomson Reuters, RBI/Raiffeisen RESEARCH

3%

-50

2%

-25

1%

0%

25

-1%

50

-2%

75

-3%

100

-4%

10y yield chg (actual to Sep-15, bp, inverted)

LCY changes vs. EUR (actual to Sep-15, %; r.h.s.)

* 8y bonds
Source: Bloomberg, RBI/Raiffeisen RESEARCH

Content

Data highlights upcoming week

Focus on

p. 2 3

Data releases, country coverage

p. 4 6

07.Jul

CZ: Industrial output, % yoy

May

4.3

4.9

3.3

1.4

Monetary policy, money markets

p. 7

FX markets
Ratings,
main macro
forecasts
Local currency
bond markets

p. 8
p.
p. 11
9-10

07.Jul

HU: Industrial output, % yoy

May

7.4

n.a.

n.a.

n.a.

6.3

07.Jul

RU: CPI, % yoy

Jun

n.a.

15.6

15.4

15.3

15.8

08.Jul

PL: Key rate, %

Jul

1.50

1.50

1.50

1.50

1.50

May

n.a.

n.a.

n.a.

n.a.

4.1

Indicator

Source: Bloomberg, RBI/Raiffeisen RESEARCH

10.Jul RO: Industrial output, % yoy

Eurobond market overview

p. 12

Period

est.

High

Mean

Low

Please note the risk notifications and explanations at the end of this document

Prev.
4.3

CEE Weekly

CEE Weekly

Focus on: Summing up costs of pre-election promises in Poland

Public debt (% of GDP)*

Recently the European Commission (EC) recommended taking Poland off the excessive Deficit Procedure (EDP). On the one hand this move may be seen as a
proof of a credible fiscal policy pushing risk premiums down, on the other it opens
up room to loosen fiscal policy which may be not welcomed by investors, in particular in a period when the upcoming parliamentary election campaign will put
pressure on politicians to make more and more costly promises to attract additional voters. In this analysis we would like to shed some light on the costs of the
proposed reforms which may help evaluate the likelihood of their implementation.

60
55
50
45
40
02

04

06

08

10

12

14

16f

* forecasts based on current revenue and expenditure

structures, i.e. not factoring in any substantial potential
fis- cal loosening
Source:
national
sources,
RBI/Raiffeisen
RESEARCH

Before we start any deliberations on reform costs it should be reminded that despite the EDP removal budget spending is still limited by the stabilizing expenditure rule. It sets the maximum increase in budget expenditures in 2016 at PLN 16
bn (2.3% yoy). Of course some reforms may influence only budget revenues but
the rule considers their impact adjusting accordingly spending limits. Anyway in
case Polands budget deficit widens a fiscal policy tightening will be enforced by
both, the national fiscal rule or an EDP re-imposition. Thus it seems that any reform
programme that can be considered as reliable can redistribute some PLN -16 bn.
Higher tax-free income threshold
One of the most popular reform proposals which have already appeared during the presidential election campaign is a higher tax-free income threshold.
Currently it is set at PLN 3,091 per annum but many claim that it is much below the minimum existence floor. The Law and Justice party (PiS) opts for raising
the threshold to PLN 8,000 which would reduce PIT income by about PLN 16.5
bn. The Civic Platform (PO) so far does not officially plan to hike the threshold
but some PO politicians suggested such a move might be considered albeit in a
lower scale. Such changes would have a significant impact on budget revenues
although they could be slightly offset by higher VAT income assuming that households will spend this additional income on consumption. In result the net annual

Budget deficit (% of GDP)*

0
-2
-4
-6
-8
02

04

06

08

10

12

14

16f

Budget revenues (PLN bn)

* forecasts based on current revenue and expenditure

structures, i.e. not factoring in any substantial potential
fis- cal loosening
Source:
national
sources,
RBI/Raiffeisen
RESEARCH

Impact of change tax-free income

10

impact of a hike in the tax-free income threshold to PLN 8,000 may be estimated
at about PLN -14 bn.
Lower VAT rate
The EDP removal raised speculations that the VAT rate could be lowered already
in 2016 rather than in 2017 as it was said by the current government. The PiS
calls also for lowering the VAT tax rate from 23% to 22%. Such a move would
in- fluence budget revenues significantly. VAT income constitutes about 45% of
the whole budget income. We assess the annual impact of a lower VAT rate at
about PLN 5 bn. The higher the GDP and inflation dynamics the less severe
would be the reform to the budget, largely driven by those factors.
Grants for multiple children families

0
-10
-20
-30
3,000
5,000
7,000
9,000
Tax-free income threshold
PIT
VAT
Net budget impact

Source:
RESEARCH

RBI/Raiffeisen

One of the most expensive proposals was presented by PiS, which aims to set
monthly grants of PLN 500 for the second and subsequent child living in a multiple children family or even for the first in case of a difficult financial situation.
Al- though the exact cost of the reform is difficult to evaluate we assume it would
in- crease budget spending by about PLN 30 bn which is consistent with the plan
of the PiS party to increase pro-family spending to 4% of the GDP (which is PLN
72 bn while the current government spends for this purpose about PLN 30-40
bn). Assuming a positive impact on demand which would boost VAT income we
esti- mate the net impact of such a reform at around PLN 25 bn.

Potential revenues from bank tax

10
8
6
4

0.60%

0.50%

0.40%

0.30%

0.10%

0.20%

2
0

The current government is so far much less generous in its promises. The most expensive proposal which has appeared was already included in the 2016 budget
assumptions. The government wants to hike the wage fund by PLN 2 bn for, in
which wages has been frozen since 2010. The net cost of this reform could be
however much lower. Higher wages would boost PIT income by about PLN 0.4
bn and VAT income by PLN 0.3 bn. Thus the net impact of this reform on the
budget may be estimated at PLN -1.3 bn.

Budget revenues (PLN bn)

Wage hikes in budgetary sphere/pubic sector

Cancelation of pension reform

One of the main promises of the PiS opposition is to cancel the pension reform
and to lower back the pension age to 60 and 65 accordingly for women and
men. That would increase budget spending on average by about PLN 5 bn per
year in 2016-2020. However the cost would be lower at the beginning of this
period and would be increasing as time passes.

Banking asset tax rate

Source: RBI/Raiffeisen RESEARCH

Potential revenues hypermarket tax

1.4
1.2
1
0.8
0.6
0.4

Another proposal presented by PiS already in 2014 assumes setting the third PIT
tax threshold at 39% (currently 18% and 32%) for people with an income above
PLN 300,000 (25,000 per month). Although such a reform could be popular
among most voters since merely 0.4% of employees may achieve the mentioned
threshold, it probably will be not a lucrative change from a budgetary
perspec- tive. We estimate it may bring additional PLN 0.2 bn in tax revenue
which seems to be a drop in the ocean considering the costly expenditure
proposals.

1.25%

1.00%

0.75%

Taxing the richest

0.50%

0.25%

0.2
0.00%

Looking for a source of financing for its costly reforms the PiS party wants to impose a tax on banking assets as well as a tax on the hypermarkets turnover. The
banking tax could be set at a rate of 0.5% of the tax base, the hypermarket taxation at 1.0%. While banking assets in Poland account for about PLN 1,550 bn,
the tax would give a rise to revenues of about PLN 7.7. Assuming that turnover
of hypermarkets stands at about PLN 100 bn the latter tax would boost revenues
by about PLN 1 bn. Thus both taxes could increase budget revenues by about
PLN 8.8 bn. The proposed tax rates could be also fine-tuned to somewhat adjust the revenues.

Budget revenues (PLN bn)

Taxing banks and hypermarkets

Hypermarket turnover tax rate

Source: RBI/Raiffeisen RESEARCH

Summing up the costs of current preelection gifts (PLN bn)

Summary
Summing up we can see that full implementation of all the currently discussed preelection gifts, mainly presented by the PiS party, is simply impossible as it would
result in a doubling of the budget deficit (in 2015 the deficit is planned at PLN
46.08 bn). Nevertheless limitations imposed by the national stabilizing expenditure rule may be easily overridden by the new government which could suspend
the rule for some time. Nevertheless it would lead to a swift re-imposition of EUs
EDP, including a threat of freezing EU funds inflow in case no tightening measures were undertaken. That would also push government bonds risk premiums
higher and would increase state financing costs. Of course partial implementation of some of the proposed changes to public spending or revenues, in particular those which are less costly or which may bring additional income triggering
no social discontent, such as a taxation of banking assets, are still likely.
Financial analyst: Michal Burek, Raiffeisen Polbank, Warsaw

Proposed
reform

Budget Budget Net imincome spending pact

Higher tax-free income

threshold
(PLN 8 ths)

-14.0

0.0

-14.0

Lower VAT rate

Grants for children
(PLN 500)

-5.0
4.7

0.0
30.0

-5.0
-25.4

Wage hikes in
budgetary sphere

0.7

2.0

-1.3

Lower pension age

0.0

5.0

-5.0

Taxing
banks
(0.5%) and hypermarkets (1%)

8.8

0.0

8.8

Taxing the richest

0.2

0.0

0.2

Sum

-4.7

37.0

-41.7

Source: RBI/Raiffeisen RESEARCH

CEE Weekly
Data releases and country coverage
This week, previous week: key data releases
Indicator

Period

Actual

Forecast

Prev. Indicator

Monday, 29 June

Period

est.

High

Mean

Low

Prev.

Friday, 3 July

HR: Industrial output, % yoy

Tuesday, 30 June

May

4.4

1.7

1.2 HR: Retail sales, % yoy

Monday, 6 July

CZ: GDP, % yoy final

PL: C/A balance, EUR bn
RS: Industrial output, % yoy
RS: Retail sales, % yoy
SI: Retail sales, % yoy
SI: CPI, % yoy
Wednesday, 1 July

Q1
Q1
May
May
May
Jun

4.0
1.6
17.7
1.5
3.0
-0.7

n.a.
2.2
n.a.
n.a.
n.a.
n.a.

1.4
2.0
-0.1
0.2
-0.9
-0.5

CZ: PMI, points

HU: PMI, points
PL: PMI, points
RO: Key rate, %
RU: PMI, points
RU: GDP, % yoy final
TR: PMI, points
Friday, 3 July

Jun
Jun
Jun
Jul
Jun
Q1
Jun

56.9
55.1
54.3
1.75
48.7
-2.2
49.0

n.a.
n.a.
52.2
1.75
n.a.
n.a.
n.a.

CZ: Trade balance, CZK bn

HU: Retail sales, % yoy
HU: Trade balance, EUR mn final
RO: Retail sales, % yoy
SK: Retail sales, % yoy
TR: CPI, % yoy

May
May
Apr
May
May
Jun

17.3
5.2
497.0
4.2
1.4
7.2

15.0
5.2
n.a.
n.a.
n.a.
n.a.

UA: CPI, % yoy

UA: FX reserves, USD bn
Tuesday, 7 July

CZ: Industrial output, % yoy

CZ: Retail sales, % yoy
HU: Industrial output, % yoy
RO: GDP, % yoy final
55.5 RU: CPI, % yoy
55.1 RU: FX reserves, USD bn
52.4 Wednesday, 8 July
1.75 HU: CPI, % yoy
47.6 PL: Key rate, %
0.4 TR: Industrial output, % yoy
50.2 BG: Industrial output, % yoy
BG: Retail sales, % yoy
19.2 Thursday, 9 July
5.0
929.0
7.5
-0.4
8.1

May

1.6

n.a.

n.a.

n.a.

2.5

Jun
Jun

n.a.
n.a.

58.4
9.7

57.5
9.4

57
9.0

58.4
9.9

4.3
4.9
3.3
1.4
6.7
9.1
5
4.0
7.4
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a. 15.6 15.4 15.3
n.a. 369.6 366.3 360.0

4.3
6.4
6.3
2.7
15.8
356.8

May
May
May
Q1
Jun
Jun
Jun
Jul
May
May
May

0.8
1.50
n.a.
n.a.
n.a.

n.a.
1.50
3.3
n.a.
n.a.

n.a.
1.50
1.8
n.a.
n.a.

n.a.
1.50
0.5
n.a.
n.a.

0.5
1.50
3.8
1.5
0.5

CZ: CPI, % yoy

HU: Trade balance, EUR mn
RS: Key rate, %
RU: C/A balance, USD bn
Friday, 10 July

Jun
1.0
May 365.0
Jul
n.a.
Q2
n.a.

1.0
n.a.
n.a.
19.2

0.9
n.a.
n.a.
13.5

0.7
n.a.
n.a.
10.1

0.7
497.0
6.00
28.9

HR: Retail sales, % yoy final

RO: Trade balance, EUR mn
RO: CPI, % yoy
RO: Industrial output, % yoy
RU: Trade balance, USD bn
SK: Industrial output, % yoy
SI: Industrial output, % yoy

May
May
Jun
May
May
May
May

n.a.
n.a.
n.a.
n.a.
18.7
n.a.
n.a.

n.a.
n.a.
n.a.
n.a.
15.3
n.a.
n.a.

n.a.
n.a.
n.a.
n.a.
10.4
n.a.
n.a.

2.5
-644.2
1.2
4.1
15.0
4.7
4.2

n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.

Source: Bloomberg, RBI/Raiffeisen RESEARCH

Bosnia and Herzegovina (BA) This week was coloured by several high-profile macroeconomic figures which are only published on a quarterly basis. Firstly, the Central Bank of B&H (CBBH) published the Balance of Payments data for Q1 2015
which delivered mixed signals. Specifically, the current account (C/A) deficit narrowed significantly in first quarter of 2015
(-19.4% yoy), on the back of trade deficit tightening which was in line with our expectations. On the other hand, the financial account data were a big disappointment, as the net inflow of FDI in Q1 2015 amounted to a tiny EUR 43.4 million.
Nevertheless, we expect that the C/A deficit will widen in course of the year (up to 8.0% of GDP in 2015), while the net
inflow of FDI should amount to 4.2% of estimated GDP for 2015. The State Agency for Statistics also published the GDP
figures for Q1 2015 which surprised on the upside. Real GDP growth accelerated to 2.1% yoy in Q1 2014, marking the
best result in a one-year period. The composition of growth surprised on the upside along with the growth rate itself. Specifically, out of the 19 GDP categories (by production methodology) followed by the State Agency only five posted negative readings, versus fourteen categories which experienced expansion in Q1 2015 (in % yoy). Wholesale and retail trade,
public administration, and construction were at the forefront of economic growth in Q1 2015, contributing to around half
of the registered real GDP growth rate. Therefore, we remain positive on our stand that the B&H economy will be able to
reach 2.5% real growth in 2015.
Financial analyst: Srebrenko Fatusic (+387(33) 287 916), Raiffeisen BANK d.d., Sarajevo

Croatia (HR) This week brought a few favourable macroeconomic outcomes. First of all, the latest data for May confirmed
the positive trends in industrial production, which grew for the fourth month in a row (+4.4% yoy). However, still-weak domestic demand remains the main limiting factor for more tangible growth, and thus in 2015 we expect mildly positive industrial growth of 1.5% yoy.

The Q1 C/A showed a deficit of EUR 1.3 bn (-13.9% yoy), but on a rolling basis in the last four quarters the C/A balance
showed a surplus of 1.1% of GDP. Solid tourism indicators from the beginning of the year positively contributed to the C/A
improvement, and thus the whole year could record a C/A surplus for the third year in a row.
Next week, the CBS will publish the tourism data for May which are expected to continue showing solid performance. Also
on the schedule for the next week are foreign trade data for the first four months and the producer price index for June.
Sluggish domestic demand and the lack of inflationary pressure from foreign markets will continue to support a PPI decline.
Therefore, although June PPI might reflect a slight positive monthly growth rate (0.2%), on an annual basis it will continue
with negative rates (-2.7% yoy), in a trend lasting since August 2013.
Turning to the financial markets, after three weeks MoF held a T-bill auction issuing 1y HRK 323 mn. As expected, with the
bid-to-cover ratio at 1.0, yields remained unchanged at 1.5%. The subdued demand partially stems from the upcoming 10year HRK bond issuance. Considering that up to April the Government covered more than 60% of this years refinancing
needs, in the case of generous issues the total financial needs for the whole year could be met.
Financial analyst: Tomislava Ujevic (+385 1 4695 099), Raiffeisenbank Austria d.d., Zagreb

Czech Republic (CZ) A wave of headline macroeconomic data will attract the attention of the domestic market next week.
The overall picture remains unchanged the Czech economy is accelerating in all sectors, with some areas reaching top
levels, and the newest data should only confirm this picture. Since wages are growing and consumer confidence is still
around its historical peak, we see space for further growth in retail sales in May by 6.7% yoy (with cars) and 5.6% yoy
(without cars). The acceleration in soft indicators suggests that industrial production should also grow. We forecast growth
in industrial production of 4.3% yoy in May. The labour market is expected to show signs of further improvement too. We
expect unemployment to decline to 6.2% from the previous 6.4%. We do not expect a strong reaction of the Czech crown
to data releases since the improving macro figures are already priced in. Nevertheless, unexpected surprises may affect
the Czech crown.
Due to the still relatively high yields we stick to our latest recommendation BUY maturities 5 years and higher.
Financial analyst: Daniela Miluk (+420 234 40 5685), Raiffeisenbank a.s., Prague

Hungary (HU) Producer prices for May increased 1% on a year-on-year basis, following a 1.7% drop in April. Our estimate was a 0.8% decrease. Overall, the data confirms our view that inflation is back on the rise on the producers' side too.
Meanwhile, June's manufacturing PMI remained at 55.1 while May's figure was revised up to 55.2. This is bad news for
us, because most of the region's indices may show some improvement. With regard to Friday's retail sales release for May,
we expect a slight improvement of 5.2% after April's downward-revised annual reading of 5.0%, partly because of the Sunday closures. As for next week's preliminary trade balance figures for May, we expect a small contraction in the surplus,
meaning that it may come down to EUR 365 million from the EUR 534 million in April due this Friday. But with the shrinkage, we believe that the gradual depreciation of the currency may support further the positive trend in the trade surplus of
the mainly export-oriented Hungarian economy.
Financial analyst: Gergely Plffy (+36 1 484 4313), Raiffeisen Bank Zrt., Budapest

Poland (PL) Developments on domestic financial markets were still dominated by reports on Greece, and thus the PMI index was a release of rather less relevance to investors. Accordingly, both the zloty and government bonds remained depressed despite the PMI surprise on the upside, as the indicator rebounded from 52.4 to 54.3 pts. Such a reversion in its
trend would underpin our scenario that after GDP growth stabilisation in Q2, the second half of the year should feature a
peak in economic activity. It seems also that the industrial output reading for June should easily meet our optimistic expectations at 6.8% yoy. The main event scheduled for the upcoming week is the MPC meeting which ends on Wednesday.
Again, the interest rate decision may be hardly surprising as no change is the most likely outcome. This time however the
Council will present the updated NBP forecasts for GDP and inflation, which may help to assess when we can expect the
first changes in monetary policy (our main case is for Q3/Q4 2016).
Financial analyst: Micha Burek (+48 609 921 092), Raiffeisen Polbank, Warsaw

Romania (RO) At the monetary meeting on 1 July, the National Bank of Romania (NBR) remained on hold, preserving
the key interest rate at 1.75%, in line with our expectations and analysts consensus. This time, the comments of the NBR
Governor were more hawkish, stating that the NBR is taking into account a prudent reconsideration of the monetary policy cycle amid the current international context and framework and due to the uncertainty related to the further status of
the agreements between Romania and international institutions (IMF, EC). The most interesting macroeconomic release next
week may be the inflation print for June, which will mainly reflect the impact of the VAT rate cut for food products and ca-

CEE Weekly

CEE Weekly

tering services/restaurants to 9% from 24% (enforced starting 1 June). We expect the monthly dynamics of inflation to be
deep in negative territory in June (-2.4% mom), resulting in an annual rate of around -1% yoy. Most likely, the annual reading for inflation will remain negative in the following year (June 2015 - May 2016).
Financial analyst: Anca Jelea (+402 1306 1265), Raiffeisen BANK S.A., Bucharest

Russia (RU) Minfin published a draft budget policy for 2016-2018. According to the document, to finance the budget deficit which is estimated at RUB 1.9 trillion and RUB 1.7 trillion in 2016 and 2017, respectively, the Ministry plans to use the
Reserve fund (RUB 1.07 trillion and RUB 1.01 trillion, respectively) and net borrowings (RUB 809 bn and RUB 692 bn, respectively). Given such assumptions, a major part of the Reserve fund is likely to be utilised by YE 2017: it should decrease
to RUB 500 bn (from RUB 4.03 trillion as of June, 2015). By way of comparison, this year the budget deficit (RUB 2.7 trillion) is planned to be covered mostly by the Reserve fund (RUB 3 trillion), while net borrowing will be negative according
to Minfins expectations (+RUB 180 bn on the local debt market and -RUB 203 bn on the Eurobond market). In 2016, Minfin expects to 1) attract funds on the Eurobond market (RUB 323 bn net); and 2) increase local borrowings (RUB 609 bn vs.
RUB 180 bn in 2015). On the local market, the ministry will focus on floaters (RUONIA+ and CPI+) and mid-term classic
OFZs. Given relatively limited amount of the Reserve fund in the medium term and certain limitations on borrowings on external market we think that Minfin will have to offer certain premiums to meet its borrowing plan.
Financial analyst: Denis Poryvay (+7 495 221-9843), AO Raiffeisenbank, Moscow

CEE Weekly

CEE Weekly
Monetary policy and money markets overview
CEE key interest and money markets outlook

Inflation snapshot
1.50
1.70
1.80
1.80

4.75
4.82
5.04
5.07

1.50
1.53
1.55
1.56

Key interest rate (%, eop)

1m money market rate (%, eop)
3m money market rate (%, eop)
6m money market rate (%, eop)
Czech Republic
Key interest rate (%, eop)
1m money market rate (%, eop)
3m money market rate (%, eop)
6m money market rate (%, eop)
Romania

1.50
1.50
1.41
1.42

1.30
1.40
1.30
1.30

1.30
1.40
1.30
1.30

1.30
1.40
1.30
1.30

7.00
7.30
7.65
7.93

1.50
1.50
1.41
1.42

0.05
0.22
0.31
0.39

0.05
0.23
0.28
0.35

0.05
0.23
0.29
0.35

0.05
0.23
0.35
0.40

0.75
1.02
1.25
1.58

0.05
0.22
0.31
0.38

Key interest rate (%, eop)

1m money market rate (%, eop)
3m money market rate (%, eop)
6m money market rate (%, eop)
Russia

1.75
1.04
1.29
1.56

1.75
1.25
1.55
1.65

1.75
1.35
1.65
1.75

1.75
1.55
1.70
1.80

6.25
6.57
6.98
7.07

1.75
0.43
0.99
1.16

Key
interestmarket
rate (%,
eop)
3m money
rate
(%, eop)

11.50
12.50

10.50
11.90

10.00
11.40

9.00
10.40

17.00
29.93

5.50
3.73

6m money market rate (%, eop)

1m
Turkey

12.50
12.59

12.00
11.60

11.50
11.10

10.50
10.10

30.31
29.16

4.12
3.23

Key interest rate (%, eop)

1m money market rate (%, eop)
3m money market rate (%, eop)
6m money market rate (%, eop)

7.50
11.28
11.34
11.35

7.50
10.70
10.80
10.80

7.50
11.00
11.10
11.10

7.75
11.50
11.60
11.60

10.00
11.99
12.15
12.48

4.50
4.61
4.74
5.12

Hungary

20
16
12
8
4
0
-4
TR

Mar-16 5y high 5y low

RU

1.50
1.70
1.80
1.80

RO

Dec-15

1.50
1.70
1.80
1.80

CZ

Sep-15

1.50
1.56
1.62
1.79

HU

curr.*

Key interest rate (%, eop)

1m money market rate (%, eop)
3m money market rate (%, eop)
6m money market rate (%, eop)

PL

Poland

CPI, % yoy (52w high)

CPI, % yoy (52w low)
CPI, % yoy (current)

Source: Bloomberg, RBI/Raiffeisen RESEARCH

Key rate trends (%)

16
14
8
12
6
10
4
2
0
Apr-15

Jul-15

Dec-15

Poland
Czech Rep.

Hungary
Romania

Russia

Turkey

Source: Bloomberg, RBI/Raiffeisen RESEARCH

Benchmark key rates (% eop)

curr.*
ECB key interest rate (% eop)

Sep-15

Dec-15 Mar-16 5y high 5y low

0.05
0.05
0.05
0.05

(% eop)
* Bid rates (for HungaryFed
ask key
rates)interest
as of 3 rate
July 2015,
09:32 a.m. CET Source:0.13
Bloomberg,0.50
RBI/Raiffeisen RESEARCH

0.75

1.00

1.50

0.05

0.31

0.01

Central bank watch

Poland (NBP)

The MPC will present the updated NBP forecasts next Wednesday which
may shed some light on the timing of the first interest rate hikes (in our base
case we expect the start of MP tightening in Q3 2016).

Hungary (MNB)

We expect deeper cuts than initially assumed, targeting a terminal rate of

1.30% by end-August. Switch to new key rate, the 3m deposit rate, next
September could bring additional easing.

Czech Republic (CNB)

Romania (BNR)

Serbia (NBS)

Russia (CBR)

Turkey (TCMB)

Source: Bloomberg, Reuters,

According to our baseline, FX intervention regime not to end before 2016

and rate hikes only to start after this. FX intervention regime seems to work
sufficiently, whilst exit will remain a challenge.
NBR on hold at the monetary policy meeting on 1 July, but the tone of the
NBR Governor was more hawkish, suggesting a prudent reconsideration
of the monetary policy cycle. Also it seems that the NBR is no more eager
on cutting minimum reserve requirements ratios in the following period.
Following the latest cut to 6%, we would not expect additional cuts. However, risks of overambitious rate cuts have increased. Contagion risks from
Greece as well as the overall elevated volatility on global financial markets
weigh, however, not as strong as the favourable assessment of Serbia's
IMF program.
CBR may act a bit more cautious in the next few months given the still
elevated inflationary risks. Nevertheless, we expect the continuation of
the rate cutting cycle in smaller steps as previously. Our year-end target is
10.00% for the Russian base rate, followed by additional 200bp cuts in
H1 2016 on easing inflation.
The Monetary Council tried to resume rate cuts by a cautious, 25bp cut to
the 1w repo rate at the gebinning of 2015, but then was forced to remain
on hold since then. As the Fed liftoff likely in September comes closer and
political uncertainty prevails, we do not foresee the continuation of rate cuts.
RBI/Raiffeisen RESEARCH

Key rate forecast (chg., bp)

0

-50

-100

-150

-200

Poland
Hungary
Czech Rep.
Romania
Russia
Turkey
3m horizon (bp)

6m horizon (bp)

Source: Bloomberg, RBI/Raiffeisen RESEARCH

Rate setting meetings

Jul
Poland (NBP)
Hungary (MNB)
Czech Rep. (CNB)

21

25

Romania (NBR)
Serbia (NBS)

Aug

1
9

6
4
13

Russia (CBR)

31

Turkey (TCMB)

23

18

Source: National
RESEARCH

Central

Banks,

Please note the risk notifications and explanations at the end of this document

RBI/Raiffeisen

Foreign exchange market overview

FX forecasts
current1 Sep-15

EUR vs

Dec-15

Mar-16

5y high

5y low

Comment

PLN

4.19

4.15

4.10

4.10

4.57

3.84

EUR/PLNs rise is for now hampered by 4.20 but may breach it depending
on developments in Greece

HUF

314.1

310.0

315.0

315.0

322.6

262.3

EUR/HUF should fluctuate around levels of 310-315 in the coming weeks,

but depending on Greek development short-term overshooting towards 320
possible

CZK

27.22

27.50

27.40

27.40

28.37

23.99

EUR/CZK fairly close to the intervention level of 27.0, but the central bank
refrained from a more active verbal intervention; with the FX regime likely
to remain well into 2016 we see little room for further appreciation of the
crown

RON

4.48

4.45

4.45

4.40

4.64

4.07

EUR/RON volatile as Greece issue is pending; political turbulences can flare

up again

HRK

7.60

7.65

7.70

7.68

7.72

7.18

Despite tourist season intensifies, upcoming EUR-linked sovereign bond maturity (EUR 350 mn) might generate slight HRK depreciation pressures

RSD

120.2

124.0

126.0

125.0

123.7

96.7

Favourable environment to support EUR/RSD; stabilisation to continue in the

summer months

RUB

61.79

60.50

63.00

59.85

84.96

38.43

UAH

23.34

25.30

26.25

28.35

37.98

9.74

BYR

17693 18480

17,997

3,779

see USD/BYR below

see rouble basket below

see USD/UAH below

17,058

17710

TRY

2.99

3.03

2.84

2.84

3.19

1.92

see USD/TRY below

USD

1.11

1.10

1.05

1.05

1.49

1.05

Euro will continue to remain under pressure as QE in euro area and rate hike
expectations in US weigh on the currencies

current1 Sep-15

USD vs

Dec-15

Mar-16

5y high

5y low

RUB

55.62

55.00

60.00

57.00

69.47

27.28

UAH

21.01

23.00

25.00

27.00

33.75

7.82

BYR

15,375

16100

16850

17600

15,705

2,969

2.69

2.75

2.70

2.70

2.76

1.40

(Coalition) government has to be formed, political uncertainty persists; shortterm overshooting above 2.80 possible in case of continued unsupportive
political news

58.39

57.48

61.35

58.28

78.59

32.94

USD/RUB
around
55limited
and seems
at thisfrom
level; CBR hovering
FX operations
with
effect to
onhave
RUB;found
most stability
risk stemming
geopolitical conflict in Ukraine and threat of new sanctions in case of further
escalation

TRY

RUB basket

see rouble basket below

IMF agreement and central bank measures stabilised UAH, but UAH depreciation likely as soon as the central bank eases the administrative measures
Steady USD/BYR depreciation to continue throughout 2015

1 as of 3 July 2015, 09:31 a.m. CET

Source: Bloomberg, RBI/Raiffeisen RESEARCH

Change of LCY value to EUR (%)

Russia
Poland
appreciationLCY

Czech Rep.
Hungary

depreciationLCY

Russia
US Dollar
Poland
Czech Rep.
Serbia
Croatia
Hungary
Romania
Turkey

Change of LCY value to USD (%)

Turkey
Belarus
Ukraine

-6%
Chg 1m

0%

6%

Chg 3m

12%

18%

Chg YTD

Source: Bloomberg, RBI/Raiffeisen RESEARCH

-30%
Chg 1m

-15%
Chg 3m

0%
15%
Chg YTD

Source: Bloomberg, RBI/Raiffeisen RESEARCH

Exchange rate comparison

125
120
115
110
105
100
95
90
85
80
75
Dec-14

Feb-15
EUR/RUB
EUR/HUF

Apr-15

Jun-15
EUR/PLN
EUR/CZK

Indexed December 2014 = 100

Source: Bloomberg, RBI/Raiffeisen RESEARCH

Local currency bond market overview

Change of LCY 10y bond yields (bp)
Turkey (9.32%)
Poland (3.22%)

PLN yield curve

HUF yield curve

3.5

5.0

3.0

4.0

2.5

3.0

2.0

2.0

Czech Rep. (1.25%)

Germany (0.84%)
Romania (3.45%)
Hungary (3.93%)
1.5

Russia (11.15%)

1.0
1

-400
Chg YTD

-200

Chg 1m

200

Chg 3m

9 10

Yield curve 02 Jul-15

Forecast Sep-15
Current swap curve

Source: Bloomberg, RBI/Raiffeisen RESEARCH

Source: Bloomberg,
RESEARCH

Change of LCY 2y bond yields (bp)

CZK yield curve

Thomson Reuters, RBI/Raiffeisen

4.5

3.5

Germany (-0.25%)

0.8
0.6
0.4
0.0
-0.2

2.0

Chg YTD

Chg 1m

9 10

Thomson Reuters, RBI/Raiffeisen

2.5

1.5
2

9 10

Yield curve 02 Jul-15

Forecast Sep-15
Current swap curve

200

Chg 3m
Source: Bloomberg,
RESEARCH

5y USD CDS spreads

HRK yield curve

9 10

Yield curve 02 Jul-15

Forecast Sep-15
Current swap curve

Thomson Reuters, RBI/Raiffeisen

Source: Bloomberg,
RESEARCH

Thomson Reuters, RBI/Raiffeisen

RUB yield curve

6.0

13

5.0

600

4.0

500

3.0

400

11

2.0

300

10

1.0

200
100
Jan-14

3.0

Source: Bloomberg, RBI/Raiffeisen RESEARCH

700

4.0

1
0

Yield curve 02 Jul-15

Forecast Sep-15
Current swap curve

RON yield curve

Turkey (9.57%)

-600 -400 -200

Source: Bloomberg,
RESEARCH

1.4
1.2

Russia (10.81%)

Yield curve 02 Jul-15

Jun-14

Nov-14

Apr-15

9 10

Yield curve 02 Jul-15

9 10

RU

Forecast Sep-15
Current swap curve

TR

Turkey 5y high 343.7, 5y low 111.7; Hungary 5y high

735, 5y low 114.9; Russia 5y high 628.7, 5y low 118.7
Source: Bloomberg, RBI/Raiffeisen RESEARCH

Source: Bloomberg,
RESEARCH

Thomson Reuters, RBI/Raiffeisen

Forecast Sep-15
Current swap curve
Source: Bloomberg,
RESEARCH

Thomson Reuters, RBI/Raiffeisen

Yield forecasts
2y T-bond yields (%)
current*
Poland
1.97
Hungary**
2.14
Czech Rep.
0.03
Romania
2.05
Croatia
2.59
Russia
10.81
Turkey
9.61
Euro area
-0.25
USA
0.63

Sep-15
2.1
2.1
0.0
2.1
2.5
10.4
10.0
-0.3
1.0

Dec-15
2.4
2.2
0.0
2.2
2.5
10.3
10.0
-0.3
1.1

Mar-16
2.6
2.3
0.0
2.3
2.6
9.4
10.3
-0.3
1.3

5y high
5.1
10.2
2.0
7.3
6.3
17.5
11.3
1.9
0.9

* Ask yields as of 3 July 2015, 09:53 a.m. CET; ** HU: 3y, HR: 5y; RU: 8y
Source: Bloomberg, RBI/Raiffeisen RESEARCH

5y low
1.5
2.0
-0.2
1.5
1.6
5.5
4.9
-0.3
0.2

10y T-bond yields (%)

current*
Poland
3.22
Hungary
3.93
Czech Rep.
1.25
Romania
4.29
Croatia**
3.50
Russia**
11.15
Turkey
9.23
Euro area
0.84
USA
2.38

Sep-15
3.4
4.4
1.0
4.2
3.5
10.3
10.0
0.8
2.5

Dec-15
3.6
4.5
1.2
4.4
3.5
9.8
11.0
0.9
2.6

Mar-16
3.8
4.6
1.1
4.6
3.5
9.5
11.5
0.9
2.8

5y high
6.4
10.7
4.3
7.6
7.3
17.0
11.0
3.5
3.7

5y low
2.0
2.7
0.3
2.6
3.0
6.3
6.0
0.1
1.4

Local currency bond market overview

CEE local currency bond market snapshot
Maturity

Coupon,
%

Ask Price

YTM, %

Spread to
Bunds, bp

MDur.

Comment

Poland

PLN 2y Gov. Bond

25/07/2017

0.00

96.11

1.94

219

2.1

PLN 5y Gov. Bond

25/04/2020

1.50

94.65

2.70

255

4.7

PLN 10y Gov. Bond

25/07/2025

3.25

100.49

3.19

236

8.5

Greece crisis may still hamper POLGBs but its impact

should not be long-lasting. Nevertheless an upward trend in
yields remains intact with core market pressure ante portas.

Hungary
HUF 3y Gov. Bond

22/06/2018

2.50

101.34

2.03

220

2.9

Latest recovery rally following Greece-induced sell-off

HUF 5y Gov. Bond

24/06/2020

3.50

102.66

2.92

277

4.7

HUF 10y Gov. Bond

24/06/2025

5.50

113.79

3.81

298

8.1

should come to an end soon. Whilst short-end of the HGB

curve should remain relatively well anchored due to ongoing rate cuts, long-end should suffer from potential Greek
events and, later on, approaching Fed liftoff likely in September.

CZK 2y Gov. Bond

11/04/2017

4.00

107.10

-0.03

22

n.a.

Current, relatively high yield levels are attractive in our

CZK 5y Gov. Bond

29/10/2019

1.50

104.95

0.34

19

4.2

CZK 10y Gov. Bond

17/09/2025

2.40

111.45

1.20

37

9.1

view in the short term since we expect a partial reversal

of the latest losses in save haven CZGBs, especially at the
back-end of the curve.

HRK 2y Gov. Bond

25/11/2017

6.25

109.50

2.14

199

2.2

The Government is supposed to tap the market with 10-year

HRK 5y Gov. Bond

05/03/2020

6.75

115.50

3.15

232

4.1

HRK bond issuance. Relatively low trading volumes might

be supportive for the EUR-linked sovereign bonds.

RON 3y Gov. Bond

17/01/2018

3.25

102.92

2.05

222

2.5

Fed tightening later this year remains a risk factor going

RON 5y Gov. Bond

29/04/2020

5.75

112.38

2.95

280

4.3

forward, while the forseen increase of the public budget

deficit in 2016 should start to be gradually scrutinized by
investors.

RUB 2y Gov. Bond

14/06/2017

7.40

94.90

10.63

1088

1.9

As expected, OFZ market suffered from pricing-out of over-

RUB 5y Gov. Bond

03/08/2016

6.90

96.50

10.67

1052

1.0

RUB 8y Gov. Bond

24/11/2021

6.50

82.00

10.80

997

5.1

aggressive rate cut expectations following the latest more

cautious central bank tonality. In the longer-term, however,
OFZ market should regain attractiveness and continue to
rally in line with ongoing rate cutting cycle.

TRY 2y Gov. Bond

16/11/2016

8.20

98.30

9.53

978

1.3

The expected short-term rally is a long time coming fol-

TRY 5y Gov. Bond

05/02/2020

7.40

92.65

9.40

925

3.9

TRY 10y Gov. Bond

12/03/2025

8.00

92.22

9.23

840

6.8

lowing the political stalemate in terms of government formation. As fed liftoff is coming closer, we would not bet
anymore on recovery rally in TURKGBs.

Czech Republic

Croatia

Romania

Russia

Turkey

Data as of 3 July 2015, 09:53 a.m. CET

Source: Bloomberg, RBI/Raiffeisen RESEARCH

Bond auctions
ISIN

Coupon

Maturity

Volume

6 July 2015
RO

6y T-bonds

n.a.

5.95%

11 Jun-21

n.a.

RU

T-bonds

n.a.

n.a.

n.a.

n.a.

PL

T-bonds

n.a.

n.a.

n.a.

n.a.

RO

1y T-bonds

n.a.

0.00%

11 Jul-16

n.a.

Eurobond market overview

CEE EMBIG USD vs. UST YTM*

CEE USD EMBIG spread valuation*

3.0

4,000

2.3

2,000

1.5

1,000

0.8

0.0

7.5

5.0

UA (CC)

BY (B-)

RS (BB-)

HU (BB+)

HR (BB)

RU (BB+)

-0.8
RO (BBB-)

LT (A-)

-2,000

PL (A-)

-1,000

TR (BBB-)*

3,000

10.0

-1.5
2.5
Jul-10

z-score (r.h.scale)*

spread (bp)*

Jul-11

Jul-12

Jul-13

Jul-14

EMBIG USD Europe *

* z-score - EMBIG USD country spread deviation from mean normalised by 1 standard
deviation, score at or below minus 1 = expensive, at or above 1 = cheap
Source: Thomson Reuters, RBI/Raiffeisen RESEARCH

Market Price
w/w %
5y max

1
Jul-15

UST * (r.h.scale)

* YTM - yield to maturity EMBI Global USD, UST - 10-year US Treasury note
Source: Thomson Reuters, RBI/Raiffeisen RESEARCH

5y min

YTM mid.
% p. a.

Spread vs.
Bmk, bp

Mdur.
years

110.5

100.3

112.2
104.6
115.0
118.2

87.7
77.1
76.0
77.9

0.74

98

1.9

XS0802005289

2.48
0.35
1.19
1.37

266
53
137
150

2.6
1.0
2.7
3.2

XS0645940288
XS0240732114
XS0369470397
XS0625388136

-0.33
-0.08
-0.08
-0.10
-0.08

114.3
109.0
105.4
124.7
124.8

94.0
95.1
98.0
99.5
99.3

0.18
0.00
0.45
1.37
1.68

39
19
57
85
93

2.5
0.6
3.4
6.6
7.6

XS0327304001
XS0242491230
XS0874841066
XS0794399674
XS0841073793

104.8
115.3

-0.24
-0.49

109.2
117.9

95.5
99.0

0.37
1.29

55
130

0.9
3.9

XS0638742485
XS0852474336

112.9
111.3

113.7
112.1

-0.62
-0.55

119.4
115.9

101.2
95.4

2.12
2.53

222
245

3.4
4.3

XS0285127329
XS0503454166

99.1
96.3

100.0
97.7

-0.08
-0.55

106.1
111.2

70.7
70.0

14.97
10.33

1496
941

0.1
2.1

XS0529394701
XS0583616239

CROATI 6 3/8 03/24/21

CROATI 5 1/2 04/04/23

108.2
103.0

108.8
103.6

-0.58
-0.82

117.8
108.6

86.7
94.4

4.66
4.98

279
276

4.7
6.2

XS0607904264
XS0908769887

REPHUN 5 3/8 02/21/23

REPHUN 7 5/8 03/29/41

108.6
133.2

109.2
134.3

0.04
-0.57

113.9
150.3

93.1
79.5

4.01
5.23

186
220

6.2
12.9

US445545AH91
US445545AF36

LITHUN 7 3/8 02/11/20

LITHUN 6 5/8 02/01/22

119.1
119.2

119.7
119.8

-0.02
-0.13

130.7
128.6

104.8
101.0

2.84
3.30

125
124

3.9
5.3

XS0485991417
XS0739988086

LATVIA 2 3/4 01/12/20

LATVIA 5 1/4 06/16/21

100.0
111.9

100.6
112.6

-0.17
-0.26

102.7
117.2

91.4
90.9

2.68
2.99

112
107

4.2
5.1

XS0863522149
XS0638326263

POLAND 3 7/8 07/16/15

POLAND 6 3/8 07/15/19
POLAND 3 03/17/23

100.1
115.7
98.3

100.2
116.1
98.8

-0.07
0.03
0.22

107.8
125.9
103.6

100.1
107.4
87.6

-1.89
2.23
3.21

-189
90
105

0.0
3.5
6.7

US731011AS13
US731011AR30
US731011AT95

ROMANI 6 3/4 02/07/22

ROMANI 4 3/8 08/22/23

117.3
103.0

118.0
103.7

-0.33
-0.36

124.4
109.5

99.2
90.8

3.71
3.89

171
169

5.3
6.7

US77586TAA43
US77586TAC09

RUSSIA 4 1/2 04/04/22

RUSSIA 7 1/2 03/31/30
RUSSIA 5 5/8 04/04/42

98.2
117.7
94.8

99.0
118.0
95.7

-0.22
0.40
-0.74

114.7
128.7
124.9

82.0
99.6
76.0

4.74
3.54
5.98

264
92
290

5.7
4.3
13.2

XS0767472458
XS0114288789
XS0767473852

SERBIA 5 1/4 11/21/17

SERBIA 4 7/8 02/25/20

103.6
101.4

104.3
102.3

-0.18
-0.03

107.1
104.6

96.8
89.6

3.49
4.43

265
284

2.2
4.0

XS0856951263
XS0893103852

TURKEY 6 1/4 09/26/22

TURKEY 6 7/8 03/17/36
TURKEY 6 3/4 05/30/40

111.2
115.7
114.8

111.9
116.3
115.5

-0.41
-0.66
-1.20

127.0
139.6
139.4

101.0
99.2
97.3

4.36
5.56
5.61

225
274
262

5.8
11.5
12.8

US900123BZ27
US900123AY60
US900123BG46

UKRAIN 7 3/4 09/23/20

UKRAIN 7.8 11/28/22
UKRAIN 7 1/2 04/17/23

51.3
54.3
53.0

52.5
55.3
54.5

0.86
1.62
0.08

108.0
106.6
101.7

37.9
37.8
40.3

24.61
19.65
19.16

2285
1747
1694

3.4
4.6
4.7

XS0543783194
XS0858358236
XS0917605841

Issuer/rate/due
EUR
BGARIA 4 1/4 07/09/17

Bid

Ask

106.7

107.2

-0.34

CROATI 5 7/8 07/09/18

REPHUN 3 1/2 07/18/16
REPHUN 5 3/4 06/11/18
REPHUN 6 01/11/19

109.4
103.0
112.8
115.5

110.1
103.4
113.3
116.0

-0.24
-0.24
-0.53
-0.58

LITHUN 4.85 02/07/18

POLAND 3 5/8 02/01/16
POLAND 1 5/8 01/15/19
POLAND 3 3/4 01/19/23
POLAND 3 3/8 07/09/24

111.8
102.0
103.9
116.4
113.6

112.3
102.1
104.3
117.4
114.6

ROMANI 5 1/4 06/17/16

ROMANI 4 7/8 11/07/19

104.5
114.7

TURKEY 5 7/8 04/02/19

TURKEY 5 1/8 05/18/20
USD
BELRUS 8 3/4 08/03/15
BELRUS 8.95 01/26/18

ISIN
---

* w/w - week on week, 5-y - 5-year low and high, YTM mid - yield to maturity based on mid market price, Bmk - benchmark, Mdur - modified duration, ISIN - international security
identification number; prices as of 3 July 2015, 10:10 a.m. CET
Source: Bloomberg, RBI/Raiffeisen RESEARCH

Summary: Ratings & macro data

Country ratings: CE, SEE, CIS
S&P
LCY

Moody's

FCY

Outlook

LCY

Fitch

FCY

Outlook

LCY

FCY

Outlook

CEE
Poland

A-

positive

A2

A2

stable

A-

stable

Hungary

BB+

BB+

stable

Ba1

Ba1

stable

BBB-

BB+

stable

Czech Republic

AA

AA-

stable

A1

A1

stable

AA-

A+

stable

Slovakia *

positive

A2

A2

stable

A+

A+

stable

Slovenia *

A-

A-

stable

Baa3

Baa3

stable

BBB+

BBB+

stable

Romania

BBB-

BBB-

stable

Baa3

Baa3

stable

BBB

BBB-

stable

Bulgaria

BB+

BB+

stable

Baa2

Baa2

stable

BBB

BBB-

stable

Croatia

BB

BB

stable

Ba1

Ba1

negative

BB+

BB

stable

Serbia

BB-

BB-

negative

B1

B1

stable

B+

B+

stable

Russia

BBB-

BB+

negative

Ba1

Ba1

negative

BBB-

BBB-

negative

Ukraine

CCC+

CC

negative

Ca

Ca

negative

CCC

CC

n.a.

Belarus

B-

B-

stable

Caa1

Caa1

negative

NR

NR

n.a.

Kazakhstan

BBB

BBB

negative

NA

Baa2

positive

A-

BBB+

stable

Turkey

BBB

BB+

negative

Baa3

Baa3

negative

BBB

BBB-

stable

SEE

CIS

* Euro area (Euro currency) members; positive rating/outlook changes (in previous week) in green, negative changes in red
Source: rating agencies websites

Main macro data & forecasts*

Country

Year

Croatia

2014e

-0.4

-0.2

2015f

0.5

0.0

2016f

1.0

2014e

2.0

2015f

Czech Rep.

Hungary

Poland

Romania

Russia

Ukraine

Turkey

GDP,
% avg.
yoy

CPI,
Unem% avg. ployment,
yoy
%

Nominal
wages,
EUR

Fiscal
balance,
% GDP

Public
debt, %
GDP

Export**,
% GDP

C/A, %
GDP

Ext. debt,
% GDP

FXR*** %
ext. debt

Import
cover,
months

17.3

1042

-5.7

85.1

22.7

0.7

108.5

n.a.

9.5

16.9

1040

-5.4

90.5

23.9

0.9

111.3

n.a.

9.2

1.4

16.7

1039

-5.0

93.7

24.5

0.7

111.1

n.a.

9.0

0.4

7.7

933

-2.0

42.6

73.9

0.6

67.0

43.3

5.0

3.2

0.5

6.6

961

-2.5

41.1

76.1

0.6

65.4

45.1

4.9

2016f

2.4

1.7

6.3

1008

-1.8

40.4

79.5

0.6

63.3

47.5

4.8

2014e

3.6

-0.2

7.7

726

-2.6

76.9

81.9

3.9

108.7

30.7

5.3

2015f

3.0

0.5

7.4

745

-2.6

75.0

81.1

3.8

92.5

32.2

4.8

2016f

2.5

2.9

6.9

754

-2.5

73.8

82.5

3.7

84.8

35.8

4.7

2014e

3.4

0.0

12.3

904

-3.2

50.1

38.1

-0.5

70.9

28.2

6.2

2015f

3.9

-0.4

10.7

946

-2.7

50.1

38.6

-1.2

69.5

28.3

6.0

2016f

3.6

1.5

9.7

1020

-2.3

49.9

38.3

-1.7

67.8

24.7

5.1

2014e

2.8

1.1

6.8

513

-1.5

39.8

31.1

-0.5

62.8

34.2

7.4

2015f

4.0

0.0

6.7

546

-2.3

39.8

31.3

-1.5

59.6

34.2

6.9

2016f

3.5

1.4

6.5

582

-2.3

39.8

32.1

-2.0

57.9

33.8

6.4

2014e

0.6

7.8

5.3

640

-1.0

11.5

26.6

3.5

35.4

56.3

14.4

2015f

-4.0

15.2

6.5

542

-4.2

12.5

25.3

3.7

37.7

70.9

21.9

2016f

0.5

7.5

6.5

579

-3.0

13.5

24.4

2.7

31.6

82.0

20.6

2014e

-6.8

12.1

9.3

240

-11.0

53.6

42.2

-4.0

96.4

5.9

1.5

2015f

-10.0

53.7

11.5

168

-7.0

81.4

48.6

-1.9

131.8

10.0

3.1

2016f

1.5

14.0

11.0

n.a.

-5.5

72.0

56.0

-0.7

143.4

12.0

3.6

2014e

2.9

8.9

9.8

n.a.

-1.5

35.0

21.2

-5.7

55.9

23.9

5.6

2015f

3.0

7.7

10.5

n.a.

-1.5

34.0

23.3

-5.1

59.8

22.8

5.4

2016f

3.5

7.5

10.0

n.a.

-1.5

32.0

21.3

-6.0

52.4

26.4

5.8

* only for countries regularly included in CEE Weekly, under revison

** Export of Goods only; *** FXR - Foreign exchange reserves
Source: Thomson Reuters, National Statistics, RBI/Raiffeisen RESEARCH

Disclosure

Risk notifications and explanations

Risk notifications and explanations

Warnings
Figures on performance refer to the past. Past performance is not a reliable indicator of the future results and development of a financial instrument, a financial index or a securities service. This is particularly true in cases when the financial instrument, financial index or securities service has been offered for less than 12 months. In particular, this very short
comparison period is not a reliable indicator for future results.
Performance of a financial instrument, a financial index or a securities service is reduced by commissions, fees and
other charges, which depend on the individual circumstances of the investor.
The return on an investment can rise or fall due to exchange rate fluctuations.
Forecasts of future performance are based purely on estimates and assumptions. Actual future performance may deviate from the forecast. Consequently, forecasts are not a reliable indicator for the future results and development of a financial instrument, a financial index or a securities service.
Raiffeisen Bank International AG is responsible for the information and recommendations in this publication which are prepared by analysts from subsidiary banks who are listed in this publication or from Raiffeisen Centrobank.
A description of the concepts and methods which are used in the preparation of financial analyses can be found at:
www.raiffeisenresearch.at/conceptsandmethods
Detailed information on sensitivity analyses (procedure for checking the stability of potential assumptions made in the context of financial analysis) can be found at: www.raiffeisenresearch.at/sensitivityanalysis
The distribution of all recommendations relating to the calendar quarter prior to the publications date, and distribution of recommendations, in the context of which investmentbanking services within the meaning of
48f (6) Z 6 Stock Exchange Act (BrseG) have been provided in the last 12 months, is available under:
www.raiffeisenresearch.at/distributionofrecommendations
Disclosure of circumstances and interests which may jeopardise the objectivity of RBI (as per Sec 48f [5] and [6] of the Stock
Exchange Act): www.raiffeisenresearch.at/disclosuresobjectivity

13

13

Bonds

Financial instruments/Company

Date of the first publication

Eurobonds

01/01/2001

LCY bonds

01/01/1997

Recommendations history: Local currency government bonds (B: buy; H: hold; S: sell; I: no change)*
Date of change
20/06/2014

CZ
5y 10y CZK 2y

2y

HU
5y 10y HUF 2y

PL
5y 10y PLN 2y

RO
RU**
5y 10y RON 2y 5y 10y RUB 2y

TR**
5y 10y

TRY

Hold Hold Hold Hold Hold Hold Hold Sell Hold Hold Hold Hold Hold Hold Hold Hold Sell Sell Sell Sell Hold Hold Hold Buy

06/08/2014

Hold

16/09/2014

07/11/2014

09/12/2014

Buy

Sell

09/02/2015

Hold

24/03/2015

28/04/2015

15/05/2015

Buy Buy

02/06/2015

Hold Hold

Hold

24/06/2015

Buy

Buy Buy Buy

Hold Hold

Buy Buy Buy

Hold Hold Hold

Buy Buy Buy

Hold Hold
I

Buy Buy Buy

Hold Hold Hold Hold

Buy

Buy

Hold

Hold

Hold

Sell Sell Sell Sell Buy Buy Buy

Hold

Hold Hold Hold Hold Hold Buy Hold Hold

Hold

Hold Hold Hold Hold Hold Buy Hold Hold

Hold

Hold

Sell

Hold

Sell

Sell

Sell

Buy Buy

Buy
I

Hold Hold

Sell

Buy Buy

Buy

Sell Sell Sell

Sell

* recommendations based on absolute expected performance in LCY

** TRY and RUB vs USD; other FX vs
EUR Source: RBI/Raiffeisen RESEARCH

Recommendations history: Sovereign Eurobonds (B: buy; H: hold; S: sell; I: no change)*

Date of change
20/06/2014
06/08/2014
16/09/2014
09/12/2014
09/02/2015
05/03/2015
24/03/2015
17/04/2015
28/04/2015
02/06/2015
24/06/2015

EUR
Hold
I
I
I
I
I
I
I
I
Sell
Hold

BG

USD
------------

EUR
Sell
I
I
I
I
Hold
I
I
I
I
I

HR

USD
Sell
I
I
I
I
Hold
I
I
I
I
I

EUR
Hold
I
I
I
I
I
I
I
I
I
I

CZ

USD
Hold
I
I
I
I
I
I
I
I
I
I

EUR
Buy
I
I
I
I
I
Hold
I
I
I
I

HU

USD
Buy
I
I
Hold
I
I
I
I
I
I
I

EUR
Buy
Hold
Buy
I
Hold
I
Buy
I
I
I
I

PL

USD
I
I
Buy
I
Hold
I
Hold
I
I
Buy
Hold

EUR
Hold
Buy
I
Hold
Buy
I
I
I
I
Hold
I

RO

USD
Hold
I
I
Hold
I
I
Buy
I
I
Hold
I

EUR
Hold
I
I
Sell
I
Hold
Buy
Hold
I
I
I

RU

USD
Hold
I
I
Sell
I
Hold
Buy
Hold
I
I
I

* recommendations based on absolute expected performance, i.e. expected spread change; Source: RBI/Raiffeisen RESEARCH

Recommendations history: Sovereign Eurobonds (B: buy; H: hold; S: sell; I: no change)*

Date of change
20/06/2014
06/08/2014
16/09/2014
09/12/2014
09/02/2015
05/03/2015
24/03/2015
17/04/2015
28/04/2015
02/06/2015
24/06/2015

EUR
-----

RS

USD
Buy
Hold
I
I
Sell
Hold
I
I
I
Sell
I

EUR
--------Hold
-I

SK

USD
------------

EUR
--------Buy
I
I

SI

USD
------------

EUR
Buy
Hold
Buy
Hold
I
I
I
I
Buy
I
I

TR

USD
Hold
I
Buy
Hold
I
I
I
I
Buy
I
Hold

* recommendations based on absolute expected performance, i.e. expected spread change; Source: RBI/Raiffeisen RESEARCH

EUR
Hold
I
Sell
I
I
I
I
I
Hold
I
I

UA

USD
Sell
I
I
I
I
I
I
I
Hold
I
I

EUR
----------

BY

USD
Hold
I
I
I
Sell
I
Hold
I
Buy
I
I

Imprint

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