Loan growth slowly recovering

Erste Bank Research Team Erste Bank

On the radar

Today, retail sales will be published in Slovenia and ESI for the whole EU.
The Czech National Bank will decide on the key rate today.
Tomorrow, PPI will be published in Hungary and Slovakia, inflation in Poland and Slovenia.
Industrial production and retail sales will be released in Croatia and Serbia tomorrow.

Economic developments

As the regional monetary easing cycle progresses, there has been a visible uptick in household lending within the banking sector. In nominal terms, loan growth reached its bottom in several CEE countries at the end of 2023, with Czechia and Slovakia registering the most sluggish nominal growth rates still in 2024. Poland's loan growth trajectory has reached a minimum in 2022, with a sluggish recovery. Croatia is a unique case, reporting a consistent rise in nominal loan growth throughout the observed period. When accounting for inflation, all the countries experienced a contraction in loan growth at the end of 2022. Poland witnessed the most pronounced downturn in real terms, with a reduction of 24% y/y. As of late, there has been a gradual shift towards positive growth also in real terms, such as in Croatia, Czechia, Hungary, Slovenia, and Slovakia. Nonetheless, it is important to note that in certain cases, this positive trend may be attributed primarily to the effects of a lower base.

Market developments

The CNB is meeting today, and the bank’s board will be deciding between a 25 or 50bp reduction in the key rate. We lean toward a 25bp decrease due to recent inflationary pressures. Additionally, the subsequent press conference could provide insights into CNB’s plans for the second half of the year. However, guidance may be limited since the CNB might prefer to wait for the new forecast due in early August. Yesterday, CEE currencies slightly weakened against the euro due to a stronger dollar, while CEE bonds remained mostly stable - except for ROMGBs, where we saw a 10bp correction in 10Y yields.

Download The Full CEE Macro Daily

Author

Erste Bank Research Team

Erste Bank

At Erste Group we greatly value transparency. Our Investor Relations team strives to provide comprehensive information with frequent updates to ensure that the details on these pages are always current.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.