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The upward economic trend in CEE countries is fully intact
and is even improving in terms of quality: growth in the region
will remain above 5 %. Foreign trade and industry will continue
to provide strong impetus, with the growing integration of
the economies with each other strengthening the growth
momentum. Private consumption and investments will join
foreign trade, which was the main engine of growth in several
countries in the previous year, in driving the economy and
will thus help to make the upswing sustainable.
� In Poland, growth will return to a level in excess of 4 %.
This development will be supported by a recovery of employment
and real personal incomes, which in turn will stimulate
consumption. A contribution to growth will also come from
heavier investment activity from financially stronger companies
and public programmes for road and housing construction
which benefit from EU financial assistance. From 2007, Poland
will be the largest net beneficiary of transfers from the EU,
receiving about € 13 bn per year, which will provide the basis
for a positive development in the long term.
� The other new EU member states will also benefit from
large investments in 2006, especially thanks to the expansion
of car production in Slovakia. In these countries, too, consumption
will be the mainstay of economic growth, additionally
supported in Hungary and the Czech Republic by tax
reductions ahead of this year’s parliamentary elections.
Interest rates: money market rates and yields on Austrian benchmark bonds (weekly)
% p. a.
4.50
4.25
4.00
3.75
3.50
3.25
3.00
2.75
2.50
2.25
2.00
1.75
42 Management Report of the Group
� Reform-minded policies and substantial foreign direct
investment will enable the countries in South-East Europe
(SEE) to pursue their catching-up process. Economic growth in
SEE will rise to 5.5 %. Bulgaria and Romania are making intensive
preparations for joining the European Union, and Croatia
is also attracting stronger attention following the start of
accession negotiations.
After fast progress in convergence in 2005, interest rate trends
and exchange rate movements in CEE will be determined by
stronger economic growth, budgetary uncertainty and elections
in some countries. Although inflation rates and a sustained strong
inflow of funds from abroad point to a stable environment, the
trend towards currency appreciation and interest rate reductions
will hardly continue in the rest of the year. Foreign direct investment
– about € 30 bn into the CEE countries in which we operate
– will be targeted mainly at Romania and Bulgaria in view of
these countries’ forthcoming accession to the European Union.
The catching-up process of the banking market in CEE will
continue in 2006, albeit at a slower pace after the high
growth rates in the past years and notwithstanding restrictive
monetary policies in some countries. Overall, we expect a
credit expansion of 22 % (after 27 % in 2005) and 16 %
growth in deposits (after 21%). Personal loans should grow by
28 %, after a 44 % increase. The growth of bank deposits will
slow down somewhat, a development reflecting the advance
of higher-grade types of investment.
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2004 2005 2006
10-year yield
5-year yield
12-month money
3-month money
ECB repo rate