Bi-Weekly Report 15-28 January 2019


The 2018 Budget achieved its target -- a deficit of 1.9% of GDP – mainly on the back of one-off non-tax revenue

The current account deficit is estimated to have narrowed by 2.0 pps to a 9-year low of 3.6% of GDP in FY:18

The capital and financial account is estimated to have not contributed, for the first time since the 2001 liquidity crisis, to the financing of the current account deficit in FY:18



Favourable food and energy prices contained end-year headline inflation -- up 3.3% y-o-y, unchanged compared with end-2017, and within the NBR's target range (2.5±1%)

The NBR will likely maintain its key rate on hold, but tighten market liquidity to ease pressure on the RON



Headline inflation stood at 2.7% y-o-y at end-2018, broadly unchanged compared with end-2017, as favourable energy prices offset the impact of stronger domestic demand and higher volatile food prices

Tourism activity weakened in FY:18, mainly due to a negative base effect



End-year headline inflation moderated to 2.0% y-o-y in 2018 from 3.0% in 2017, due to lower core inflation and favourable prices of fruits and vegetables

The NBS is set to keep its central rate (the 2-week repo rate) on hold at an all-time low of 3.0% this year



Credit growth reached a 3-year high of 7.2% y-o-y at end-2018, mainly on the back of higher lending to corporates

Customer deposit growth almost doubled in FY:18 (up 9.5% y-o-y), due to improving confidence in the domestic economy

Residential real estate prices recovered in FY:18 (up 1.8%), due to improving economic activity and accelerating mortgage lending



Headline inflation ended 2018 at 1.8% y-o-y -- well below its target for an 8th successive year

The BoA is set to maintain its key rate on hold this year



Banking sector returns to the black in 9M:18, due to lower provisioning and an exceptional accounting gain related to Hellenic Bank's acquisition of Cyprus Cooperative Bank's operations



The sizeable fiscal consolidation planned for this fiscal year -- 1.8 pps of GDP – is on track

FX reserves increased by USD 5.5bn to an all-time high of USD 42.6bn (7.2 months of imports of GNFS) in 2018, underpinned by solid implementation of the loan agreement with the IMF (signed in November 2016)


Appendix: Financial Markets

Bi-Weekly Report 15-28 January 2019