The financial experts who take part in the survey carried out by the ZEW, the Centre for European Economic Research, Mannheim, and Erste Bank der oesterreichischen Sparkassen, Vienna, do not expect a significant change in the economic development of the CEE countries in the next six months. The experts assess the current economic situation in the Central and Eastern European region as good. For Austria, the situation is also evaluated as good. However, the expectations of the experts concerning the economic development in the next six months have worsened by now.

The ZEW-Erste Bank Sentiment Indicator CEE, that gives the balance of positive and negative assessment for the economic development within the next six months, has dropped again in the July survey by 1.8 points and now stands at 8.8 points. Still, the majority of financial experts projects no change of the current situation (70.2 percent). This share has decreased by 8.4 points. The share of respondents expecting an improvement of the economic development is relatively stable (+3.3 points). The share of financial experts assessing the current economic situation in the CEE countries as good is a bit lower compared to last months' survey and the balance is now at 61.4 points.
For Austria, the experts also assess the current economic situation as good and the balance is higher with 75.6 points than for the CEE countries. However, the economic outlook has worsened; the balance is now negative (-7.3 points). This means that the share of experts forecasting a decline of the business cycle in the next six months outweighs the share of optimistic experts.
The experts forecast increasing inflation rates for the Central and Eastern European Countries as well as for Austria. The balances increased by 6.0 and 6.5 points respectively compared to the June survey. The respondents' expectations differ considerably between the CEE countries, but only for Hungary the experts forecast a lower inflation rate in six months. However, the balance for Hungary has also risen by 9.1 points compared to last months' survey. Consistent with this view, the financial experts expect decreasing long- and short-term interest rates in Hungary. Also for Romania, the experts forecast lower short- and long-term interest rates. For all other countries, the share of respondent expecting increasing interest rates in the next six months outweighs the share expecting decreasing interest rates.
The optimistic expectations of financial experts for stock market development have again decreased in the July survey for some countries. The balances are still clearly positive for the development of all stock market indices. Nevertheless, the balances are smaller compared to last month for the Czech Republic, Poland, and Romania. For Croatia the balance strongly increased and now reaches 68.6 points.
The expected exchange rate development varies between the countries this month. The financial experts forecast an appreciation of the Czech and Slovak currency against the Euro and a similar development for the Zloty and the Lei. For these currencies, the balances are clearly positive. For the Kuna and the Forint, the difference between the share of experts expecting an appreciation and the share expecting a depreciation has decreased markedly with -21.4 respectively -15.1 points.
In the July survey, the experts answered special questions with regard to portfolio allocation between stocks and bonds and allocation of a stock portfolio between the Eurozone and the CEE as well as within the CEE region for the second half of 2007. The experts would give no strong preference to stocks or bonds in the portfolio. In addition, the stock portfolio of the experts would consist to a larger extent of stocks from CEE countries compared to Eurozone stocks.

Survey Procedure
The Financial Market Report CEE presents the results of a survey by ZEW and Erste Bank der oesterreichischen Sparkassen AG Vienna, among financial market experts and is published monthly since June 2007. It offers insights into the assessment of the current economic situation, and their expectations for Central and Eastern Europe, Austria and the Eurozone for the next six months concerning the general economic situation, inflation rates, interest rates, exchange rates and stock market indices. The CEE region observed in the survey consists of Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia and Slovenia.
The indicators reflect the difference between the percentage of analysts who are optimistic and the percentage of analysts who are pessimistic. The possible outcome of the balance lies between -100 and +100 points. Positive values of the balance indicate that the number of participants expecting a rise in the respective variable outweigh the number of participants with negative expectations.

For further information please contact:
Dr. Katrin Ullrich
Phone: +49/621/1235-145, Fax: -223
E-Mail: ullrich@zew.de