Page 5 - bne_Magazine_February_2019

bne February 2019 The Month That Was I 5
Economics
Eastern Europe
Russian inflation is in focus for 2019 as prices began to rise at the end of 2018 and ended the year slightly above the Central Bank of Russia (CBR) target rate of 4%. However, the World Bank says that inflation will remain low this year and growth will be 1.5%, the same as in 2018.
Russia’s ruble opened 2019 at a three year low against the dollar before paring losses at below 70 rubles. In 2018, the Russian currency lost 21.1% of its value against the dollar and 15.5% versus the euro.
A VAT hike from 18% to 20% went into effect on January 1 that will provide some new money, but most is coming in from an IT overhaul of the tax service that saw revenues in 2018 soar by a whopping 22%, while the overall tax burden remained more or less the same. Very little of the revenue increase can be attributed to increased taxes which are low by EU standards.
Russia’s economy slowed somewhat as the holiday season started, with the IHS Markit Russia manufacturing and services indices slowing in Decem- ber from previously strong results in November, but remaining above the 50 no-change mark, which means the economy continued to expand.
Russian spend a third of their income (31.2%) on food, according to RIA Rating. Luxembourg spend the least of all on food (8.7%), followed by the UK (10%), and the Netherlands (10.6%). Ukrainians spend the most, where food takes up 50.9% of the domestic budget, and Kazakhstan with 46%.
Central Europe
The Czech National Bank (CNB) decid- ed to increase a key interest rate to 1.75% with effect from January 1, 2020, taking into account optimistic expecta-
tions toward future household income and asset prices, including property prices. The CNB has raised the coun- tercyclical capital buffer rate five times since the end of 2015, when it used this rate for the first time.
Gross wages in the Polish corpo-
rate sector grew 7.6% y/y in Novem- ber, 0.1pp faster than the annual read- ing in the preceding month, the statistics office GUS said. The reading extends
the long trend of robust wage growth
in Poland that owes to the tightening of the country’s labour market.
The percentage of Estonians living in relative poverty expanded to 22.6% in 2017, while 3.4% lived below the absolute poverty threshold, data from Statistics Estonia showed. The num- ber of people living in relative poverty increased as much as 1.6pp and the number of those living in absolute pov- erty by 0.2pp, compared to 2016 data.
The total debt of Czech coach opera- tor RegioJet exceeded CZK1bn (€38.8mn) in 2017 due to the purchase of four new trains and expansion to new lines, its annual report showed. RegioJet publishes its annual reports
at the latest point allowed by the law, citing the advantage enjoyed by German competitor FlixBus, which does not have to publish any annual reports.
Southeast Europe
Croatia’s economy is expected to expand 2.7% in 2019, thanks to the strengthening of government invest- ment due to more intensive use of EU
funds, and further growth of private consumption, the Croatian central bank said. This is the same rate as projected for 2018.
Bosnia’s economy grew by a real 3.2% y/y in the third quarter of 2018, slow- ing from a revised 3.6% y/y expansion in the previous quarter, the country’s statistics office reported. More than half of the reported growth, came from the wholesale/retail trade category which soared by 9.0% y/y, Raiffeisen analysts pointed out.
Eurasia
Georgian lawmakers passed the gov- ernment’s 2019 budget, with 91 votes for and nine against. The budget targets a deficit of 2.6% of GDP on assumptions of GDP growth of 4.5%. The country’s economy expanded by 5.1% y/y in the first 10 months of 2018, up from 4.9% in the same period of 2017.
Kazakhstan’s bilateral trade with fel- low members of the Eurasian Eco- nomic Union (EEU) grew by 7.2% y/y to $15.52bn in January-November. The rise in trade with Russia, Belarus, Kyrgyz- stan and Armenia is attributable to grow- ing world oil prices and rising oil output in the country, which supports growth in the Kazakh economy, boosting trade.
The World Bank forecast that growth in Central Asia will largely remain flat in 2019 in its latest Global Eco- nomic Prospects report. The World Bank expects the region’s largest economy, Kazakhstan, to record 2018 growth at 3.8%, down slightly from 4% recorded in 2017 with a further deceleration to 3.5% in 2019, attributing the consistent 4%-4.1% growth rates seen throughout 2018 to higher than expected produc- tion at the Kashagan oil field and strong domestic demand.
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