Equities in South East Europe registered gains for the week with only Athens and Belgrade bucking the trend. Mounting worries about soaring inflation and monetary tightening by central banks did not seem to unnerve investors as well as news that both the OECD and World Bank had cut their global growth forecasts for this year, citing risks from persistent inflationary pressure.
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Stocks as measured by the Athens Exchange (ATHEX) general index returned -3.83%. Greece recorded a 7% annual growth rate in the year’s first quarter, the Hellenic Statistical Authority (ELSTAT) announced on Tuesday. The OECD expects the Greek economy to grow by 2.8% this year and 2.5% in 2023. However, the country’s annual consumer inflation jumped to its highest level in 29 years last month at 11.3% on the back of surging costs for energy, housing, transportation and foods.
Equities in Serbia fell this week with the BELEX15 index dropping 1.28%. On the monetary policy front, the National Bank of Serbia hiked its main interest rate by 50bps to 2.5% on Thursday, the third straight rise in borrowing costs, and in line with market forecasts. Interest rates are now at their highest level since 2019. “In making the decision on further tightening of monetary conditions, the Executive Board took into account the continuation of the Ukraine conflict, which resulted in deepening of the energy crisis globally, a further spike in the prices of primary agricultural commodities and industrial raw materials, and the continued aggravated functioning of international supply chains.”
Romanian assets gained. The bluechip BET index returned 1.77%. Romania’s GDP increased by 6.5% y-o-y in the first quarter of 2022 provisional data showed. Meanwhile, the World Bank sees Romania’s GDP growth at 2.9% this year and the IMF raised its forecast for Romania’s 2022 economic growth to 3.5% from 2.2%. Austrian banking giant Erste also lifted its forecast for Romania’s 2022 GDP growth to 5.1% but the Balkan country’s annual inflation rate surged to 14.5% in May compared to May 2021, data from the country’s statistics board INS showed.
Slovenia’s stock market generated positive returns. The SBITOP index jumped 2.15%. The OECD downgraded Slovenia’s 2022 GDP growth forecast to 4.6%.Inflation will rise along with high and continually rising fuel and food prices, with the OECD pointing to the major risk of wage growth leading to an inflationary spiral. The country’s annual inflation rate jumped to 8.1% in April, achieving a near 19-year high vs. 6.9 % increase a month ago, the statistical office said.
Stocks in Cyprus were higher with the general index of the Cyprus Stock Exchange growing 0.95%.
The island’s growth rate for 2022 is expected to be 2.7%, while inflation will rise to 7% according to the revised June forecasts, published by the Cyprus Central Bank on Friday. Next year and 2024, GDP is expected to recover to 3.6% and 3.7%, respectively, although some scarring effects on the turnover of the professional and financial services sectors can not be ruled out, according to the CBC.
Bosnia’s stock market led the gains in the region. The SASX10 soared by 5.04%. The World Bank cut Bosnia’s 2022 GDP growth forecast to 2.7%, 0.3 percentage points below the forecast the Washington-based bank made in January. In 2023, Bosnia’s economy projected to grow by 3.1% the lender said in its June 2022 Global Economic Prospects report published on Tuesday.
Bulgaria’s stock market returns were positive with the SOFIX index up 0.76%. On the macro front, Bulgaria’s GDP grew 4.0% y-o-y in the first quarter preliminary data showed. The World Bank sees Bulgaria’s GDP growth slowing down to 2.6% this year, while the OECD cut Bulgaria’s 2022 GDP growth forecast to 2.5%. The country’s Minister of Finance raised this year’s average inflation forecast to 11.9% in budget revision draft.
Croatian assets were also higher. The CROBEX index rose 0.49%. Croatia’s consumer confidence worsened in May official data showed while the central bank governor said that inflation in the country could reach 9% this year. In other economic news. Croatia’s trade gap widened 62% y-o-y in the first four months of the year and the industrial PPI was up 23.7% y-o-y in May.
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Kyriaki Balkoudi is a markets editor for World Markets Daily. She has a bachelor’s degree in Balkans Studies from Aristotle University of Thessaloniki, Greece and a master’s degree in International Politics from City University London, UK.