Page 6 - Central & Southeast Outlook 2020

Banks in the region have been doing well during the recent period of robust economic growth, and for the most part are expected to remain healthy and stable, though there are warning signs they will be affected by the impending slowdown in the region.
In 2019, rating agency Moody’s downgraded outlook of the Czech banking sector from positive to stable, mostly due to a slowdown in economic growth. The Lithuanian central bank has also pointed to risks to the stability of the local banking sector stemming from the potential correction of imbalances in the Nordic countries and the formation of a “potentially unsustainable financial cycle” in Lithuania.
The Baltic banking sector continued to be battered by financial scandals in 2019, and the repercussions are set to continue into 2020.
Danske Bank was at the centre of a financial scandal following the revelation in 2018 that an estimated €200bn worth of payments went through its Estonian branch between 2007 and 2015, many of them suspicious. The bank announced the closure of its Estonian operations, as well as those in Latvia, Lithuania and Russia, in 2019.
In October 2019, Estonian police and prosecutors opened a criminal investigation against Swedbank over alleged money laundering in the bank’s Estonian branch.
In Latvia, the trial of the head of Latvia’s central bank governor, Ilmars Rimsevics (who has since been replaced) began in November. Rimsevics is accused of accepting a bribe of €500,000.
1.0 ​Macro
1.1 ​Macro - Czech Republic
Key economic figures and forecasts
2015 2016 2017 2018 2019e 2020f 2021f
Nominal GDP (EUR bn) 168.4 176.4 191.6 207.6 215.6 222.1 229
Real GDP (% yoy) 5.4 2.4 4.5 2.9 2.5 2 2.2
Industrial output (% yoy) 4.3 3.4 6.5 3 0.6 0.4 1
6​ CESE Outlook 2020​ ​ ​www.intellinews.com