Bi-Weekly Report 9-22 January 2018


The 2017 Budget outperformed its target, supported by spending restraint and stronger-than-initially-expected GDP growth in H2:17, with a full-year deficit of 1.5% of GDP

The current account deficit is estimated to have widened by 1.7 pps to a 4-year high of 5.5% of GDP in FY:17, on a sharp rise in gold imports and an unfavourable energy bill



A new PM, V. Dancila, to take office, ending a crisis within the senior party of the coalition Government

Headline inflation rose to a 4-year high of 3.3% y-o-y at end-2017 from -0.5% at end-2016



Headline inflation rose sharply to 2.8% y-o-y at end-2017 from 0.1% at end-2016, on the back of higher energy prices and stronger domestic demand

Bulgaria to apply to enter the Exchange Rate Mechanism (ERM-2) during H1:18



Serbia's EU accession pace is set to slow temporarily, due to the assassination of a prominent Kosovo Serb leader

Following a temporary weather-related slowdown in FY:17, the pace of GDP growth is set to accelerate to a post-global crisis high of 3.6% in FY:18



Tensions between President Ivanov and the coalition Government escalated, with no risk to political stability

A new sovereign bond issue at a historically-low interest rate (3%), due to improved investor confidence in the domestic economy and a benign global backdrop

End-year headline inflation rose to 2.4% y-o-y



Headline inflation declined to 1.8% y-o-y at end-2017 from 2.2% at end-2016, due to softer food inflation

The BoA is set to initiate a cycle of monetary policy tightening in H2:18



Upcoming Presidential elections to maintain the Government's reform drive

Banks' elevated loan loss provisions weighed on 9M:17 bottom line



Outgoing President el-Sissi is widely expected to win the upcoming March-April presidential elections

Headline inflation declined at a faster pace in November-December (8.9 pps between October and December), on the back of a strong base effect from the flotation of the domestic currency and the rise in regulated fuel prices a year earlier


Appendix: Financial Markets

Bi-Weekly Report 9-22 January 2018