CEE Central Bank Report: 1st September 2020 Report
By: The Quinnipiac University Economics Research Team, Kyle Del Balso
Last updated: 9 September 2020
This report includes an update on the
· Czech Republic latest announcement on economic activity for 2020 Quarter 2
· Hungary’s Monetary Council Meeting of 25 August 2020 on interest rates
· Poland’s latest Money Supply Report for July 2020
· Romania’s Press Release on International Reserves for August 2020
· Slovakia’s special announcement for August on GDP, labor markets, and inflation rates.
Czech National Bank’s (CNB) - https://www.cnb.cz/en/
According to Czech Statistical Office report, economic activity decreased by 8.7%, one percent smaller than the prediction by the CNB for 2020 Quarter 2. The CNB released a statement saying the published data reinforces the coronavirus pandemics negative impacts to the economy. The CNB’s current forecast predicts GDP will fall “by around 8% overall this year and economic activity will return to growth next year. However, the economy will not reach the pre-pandemic level until end of 2022.”
Hungary - https://www.mnb.hu/en
Interest Rate Update
Reviewing the economic and financial developments, the Monetary Council decided to hold the interest rate at 0.60%. According to the Council’s assessment, “the 0.60 percent base rate supports price stability, the preservation of financial stability and the recovery of economic growth in a sustainable manner”. The Bank also ensured additional economic stimulus (if needed) using “using its targeted instruments, i.e. the Funding for Growth Scheme Go! and the Bond Funding for Growth Scheme, providing the most direct support to investment.” For more information on the interest rate and other Monetary Council decisions, go to https://www.mnb.hu/en/monetary-policy/the-monetary-council/press-releases/2020/press-release-on-the-monetary-council-meeting-of-25-august-2020.
The Polish National Bank released its Money Supply Report for July 2020 stating the “M3 money supply decreased by PLN 5.4bn. The decrease was mostly driven by a decline in deposits and other claims of other financial institutions.
According to data released by Narodowy Bank Polski on 24 August 2020, the M3 aggregate, reflecting the total supply of money, amounted to PLN 1,740.8bn at the end of July, i.e. PLN 5.4bn less than at the end of June 2020.
In July 2020, the value of household deposits and other claims of households included in the M3 aggregate decreased by PLN 0.8bn, i.e. 0.1%, and amounted to PLN 942.0bn. The stock of deposits and other claims of other financial institutions dropped by 7.1bn, i.e. 11.5%, to PLN 54.6bn. The value of corporate deposits and other claims of corporates decreased by 0.5bn, i.e. 0.1%, to PLN 363.7bn, and in the local government sector it increased by PLN 0.8bn, i.e. 1.8%, to PLN 46.8 bn.
Household debt declined by PLN 0.6bn, i.e. 0.1%, to PLN 779.1bn. The stock of banks’ claims on corporates dropped by PLN 7.7bn, i.e. 2.0%, to PLN 377.4bn, and the net debt of central governments entities decreased by PLN 5.5bn, i.e. 1.5%, to PLN 365.2bn.”
For the full money supply data:
The NBR released the following on its international reserves:
“On 31 August 2020, the National Bank of Romania’s foreign exchange reserves stood at EUR 35,768 million, compared to EUR 36,249 million on 31 July 2020.
During the month, the following flows were recorded:
EUR 1,360 million worth of inflows representing changes in credit institutions’ foreign currency-denominated required reserves, inflows into the Ministry of Public Finance’s accounts, inflows into the European Commission’s account and other;
EUR 1,841 million worth of outflows representing changes in credit institutions’ foreign currency-denominated required reserves, interest payments and principal repayments on foreign currency public debt and other.
The gold stock remained steady at 103.6 tonnes. However, following the change in the international price of gold, its value amounted to EUR 5,497 million.
On 31 August 2020, Romania’s international reserves (foreign currencies and gold) stood at EUR 41,265 million, compared to EUR 41,808 million on 31 July 2020.
During September 2020, the payments due on the foreign currency-denominated public and publicly guaranteed debt amount to approximately EUR 2,171 million.”
The next press release on international reserves is set to be delivered on October 1st 2020.
Slovakia - https://www.nbs.sk/en/home
The National Bank of Slovakia (NBS) has not had a major announcement yet in September. Their NBS Monthly Bulletin for August 2020 states “Euro area GDP fell by 12.1%, quarter on quarter, in the second quarter of 2020. The severe contraction resulted from large parts of the economy being shut down. The largest declines in economic activity were in those countries that implemented the strictest and longest-lasting lockdown measures. Their impact was seen mainly in the enforced restriction of household consumption and corporate investment. The most recent monthly data indicate that the decline in activity bottomed out early in the second quarter and that the economy is on a gradual path towards normal functioning.
In Slovakia, the economy contracted by 8.3% in the second quarter of 2020 vis-à-vis the previous quarter, and all GDP components made negative contributions. Monthly data showed declines in both consumption and investment demand. Supply chain disruptions weighed heavily on foreign trade. As in the euro area, the economy started bottoming out at the beginning of the second quarter. Its subsequent gradual opening up appears to have had an upward impact not only on sentiment, but also on economic activity indicators. Given that trends are better than projected in the most recent NBS forecast and that indicators are on a favourable path, the economy could recover at a slightly faster pace.
Employment declined by 1.1% in the second quarter compared with the first quarter, or by around 26 thousand in headcount terms. The employment data probably reflected the impact of fiscal measures aimed at preserving jobs as well as the relatively fast economic recovery. Recruitment began picking up, especially among firms in the services sector. The average wage level declined, year on year, in the second quarter. With the economy gradually beginning to recover, however, the number of hours worked is starting to increase and the wage level is decreasing at a more moderate pace.
The annual HICP inflation rate is on a gradual downward trend. Autonomous cost factors such as commodity prices are putting downward pressure on headline inflation. On the other hand, demand factors remain relatively elevated, probably reflecting the impact of deferred demand.
Lending to both firms and households slowed in the second quarter. Firms are now starting to recover, as evidenced by real economy indicators and bank deposits. Household demand for property purchases has not diminished, so it is pushing up property prices. The crisis, however, has seen a reduction in borrowing for consumption purposes.”
For the full report: