Relatively modest economic growth registered in the first part of 2013, an acceleration being possible in the second half of the year, conditioned however by the recovery of European economies, Ionut Dumitru, Raiffeisen Bank’s chief economist, stated in a report authored by the bank’s research team and sent from Vienna.“In the following years economic growth largely depends on the absorption of EU funds and on the progress made when it comes to structural reforms. In what concerns the exchange rate, we expect it to be stable in 2013 in the RON 4.4 – 4.5/EUR interval, its evolution being conditioned by two determining factors: the developments registered in the Euro Area and their impact on the appetite for risk and on local developments, especially those tied to the relationship with the IMF,” he added.Economic activity in Europe and in the USA remains sluggish, the report shows.
Although the leading indicators, such as the ISM and the ifo index, are continuously pointing to better sentiment amongst companies, the improvement has yet to be confirmed by hard facts, such as new orders. “Nevertheless, we are confident that the economic recovery will get underway in the second half of the year. Even before mid-year, net exports should bring the first signs of economic growth and subsequently stimulate investments.”In the core Eurozone countries around Germany, there are also other arguments pointing to an upward trend in private consumption, such as the robust labour market and good wage developments for employees. The steep decline in the rate of inflation in 2013 will open up more leeway for gains in real income. Nevertheless, income effects are only expected to start playing a role from 2014 onwards. Even though this year’s GDP forecasts for the Eurozone looks poor at first glance, with negative performance in the prognoses, the overall trend in the coming 12-18 months should point higher. Nonetheless, the divergence in economic activity within the Eurozone will likely last somewhat longer.
The budget cuts implemented in the USA in March are compatible with our GDP projection of 1.5 per cent for 2013.
Cyprus is also a problem right now, and thus the euro will probably only appreciate later in the quarter. Until the summer, the EUR/CHF range of 1.20 to 1.25 should remain completely intact. Money market rates remain at historically low levels, as reflected for example in the 0.0 per cent level of the EONIA (Euro Overnight) rate.