WARSAW/PRAGUE (Reuters) - Economists expect most central European currencies to rebound or remain stable over the next 12 months as the region’s economies recover more quickly from the coronavirus pandemic than western counterparts, a Reuters poll showed.
Along with other emerging market assets, central European currencies took a hammering as the novel coronavirus reached Europe, with investors ditching riskier assets as economies went into lockdown.
“We expect that in general the CEE currencies will gain because the rebound of these economies, of the Hungarian economy, the Czech economy and the Polish economy, will be stronger than other European economies,” said Mateusz Sutowicz, financial market analyst at Bank Millennium in Warsaw.
Central Europe’s economies had been enjoying a period of strong growth before the virus hit, in contrast with the sluggish growth posted by many western neighbours.
According to the poll of 33 analysts the Polish zloty, the region’s most liquid currency, will gain 3.3% to 4.40 against the euro in the next 12 months.
“The GDP forecast prepared by the European Commission showed that the recession in Poland will be the lowest this year in the European Union,” said Sutowicz.
“After a poor second quarter we expect a solid rebound... and that will be the fundamental side of the appreciation of the zloty that we expect,” he added.
The poll forecast that the Czech crown would firm around 5.0% against the euro to 25.875. However, estimates for the poll were collected before the Czech central bank delivered a bigger-than-expected 75-basis-point rate cut on Thursday.
The bank’s latest cut brings the two-week repo rate to 0.25%, down a total of 200 basis points since mid-March.
The Hungarian forint is forecast to be broadly stable over the next 12 months, firming 0.1% to 350 to the euro.
Hungary’s central bank has said it could buy up to 100 billion forints worth of bonds per week as part of an asset purchase programme that aims to drive down long-term yields.
“We don’t expect the NBH QE (3% of GDP at the first technical review) to have a detrimental effect on HUF,” said Peter Virovacz, Senior Economist at ING in Hungary.
“This, along with elevated front-end rates (at least when compared to PLN and CZK), should keep the currency stable,” he said.
The Serbian dinar is also forecast to be broadly stable over the next 12 months, falling 0.14% from Thursday’s close to 117.75 against the euro.
“The Serbian dinar has been remarkably stable despite the central bank delivering 75 basis points of cuts since the beginning of the year,” said Jakub Kratky, financial analyst at Generali Investments CEE.
“We expect that there will be some recession in Serbia this year but it will be milder than in other CEE countries,” he said.
The Romanian leu continues to be plagued by worries about the country’s twin budget and current account deficits and political uncertainty. It is expected to fall 1.57% to 4.90 to the euro in the next 12 months.
“On the Romanian leu it’s still the same story,” said Kratky. “The fundamental worsening which came already before the pandemic... leads to some depreciation pressure on the currency.”
Reporting by Alan Charlish and Miroslava Krufova. Editing by Jane Merriman