Bi-Weekly Report 10-23 January 2017


Political and economic uncertainty to intensify ahead of a referendum on a contentious constitutional reform package

Implicit tightening to continue at least until the early-April referendum

Headline inflation to remain stubbornly high, ending 2017 at 8.2% y-o-y



A new Government takes office

Tax cuts keep headline inflation in negative territory for a second consecutive year in 2016 (-0.5% y-o-y at end-year against -0.9% at end-2015)



Weak domestic demand contains headline inflation in 2016

Leading indicators point to sustained growth in Q4:16



The IMF Executive Board completes the 6th review of the ongoing 3-year EUR 1.2bn precautionary SBA

Headline inflation remains persistently low, ending-2016 at 1.6% y-o-y, due to favourable prices of fruit and vegetables



End-year headline inflation to enter positive territory, for the first time in four years, in 2017

The 2016 Budget likely outperforms its target, despite large election-related slippage in December



The Constitutional Court ruling paves the way for the implementation of the vetting law in early-February

Headline inflation continues on an upward trend for a second successive year; but remains below its target of 3.0%



End-year headline inflation to turn positive for the first time in five years in 2017

The current account deficit narrows significantly by 1.4 pps y-o-y to 0.4% of GDP in 9M:16, on the back of a sharp improvement in the balances of ships and services



End-year headline inflation rises to a 3-decade high of 23.3% y-o-y in 2016 from 11.1% in 2015, mainly due to the flotation of the domestic currency and cuts in energy subsidies

The quarterly current account deficit widens sharply in Q1:16/17 to 6% of GDP on a 12-month rolling basis; but was more than covered by a stronger capital and financial surplus


Appendix: Financial Markets

Bi-Weekly Report 10-23 January 2017