Page 5 - bneMag April 2022 Russia living with sanctions

bne April 2022 Companies & Markets I 5
CEE: GDP forecast
CEE: CPI inflation forecast
Source: Oxford Economics/Haver Analytics
to prop up the currencies. It points out that the Czech koruna, the Hungarian forint and the Polish zloty all lost over 10% against the dollar after the news of the invasion before the respective central banks intervened in FX markets in support of their currencies.
Oxford Economics expects the policymakers to maintain their hawkish stance – which will also affect domestic demand – “but sell-off pressures are likely to continue despite the rate differential to the Eurozone”.
“The outlined policy approach of CEE central banks could prove increasingly hard to maintain – especially if CEE currencies remain under pressure, fiscal policies remain overly loose, and tight labour markets (coupled with elevated
Source: Oxford Economics/Haver Analytics
inflation expectations) continue to support fast nominal wage growth, keeping an upward pressure on core inflation,” it warns.
The biggest unknown, the forecaster says, is the impact of the huge refugee wave the region has taken in. It says about 85% of Ukrainian refugees (some 2.4mn out of 2.8mn) have sought refuge in the CEE, and given the geographical and cultural links, most will stay until the end of hostilities, if not beyond.
This will boost consumption and help ease the tight labour markets, but will also involve significantly higher fiscal spending, unless the EU comes to the region’s aid.
Sber cuts loose its European operations
Robert Anderson in Prague
Sber, Russia’s largest bank, is cutting loose its European operations after having been targeted by Western sanctions.
"In the current situation, Sberbank has decided to leave the European market," it said in a statement. "The group's subsidiary banks have faced abnormal cash outflows and threats to the safety of its employees and branches."
Sberbank Europe was ordered to close its doors by the European Central Bank on Monday, February 28 amid a rush on deposits, and regulators are now making sure that its Central and Southeastern European operations are quickly sold to other banks or wound down.
Confidence in the bank has been shaken by the Russian invasion of Ukraine and the imposition of Western sanctions on parent Sber of Russia, which is now excluded from the SWIFT international payment system.
The authorities stepped in after warnings that Sberbank Europe was facing the risk of collapse after clients across Central and Southeast Europe rushed to withdraw their deposits.
“There are no available measures with a realistic chance of restoring this position at group level and in each of its subsidiaries within the banking union,” the ECB said on Monday.
Sberbank Czech Republic will be liquidated.
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