Analysis: Romania, among the most exposed countries in the EU to energy prices

An analysis by Goldman Sachs shows that Poland, Hungary, the Czech Republic and Romania are more exposed to higher energy prices than the rest of the EU countries, Ziarul Financiar announces.

Dependence on imports and foreign investment, the vulnerability of currencies to internal and external shocks, the need to balance often explosive and unsustainable economic growth with price increases put the central banks of emerging economies, such as those in Eastern Europe, in the face of elections. difficult. The current crisis, with the pandemic coming back with new forces, with generalized price increases, with shortages of all kinds and interruptions on the supply chains and above and with an energy crisis, makes life even harder for these institutions.

In Poland, the region’s largest economy, inflation accelerated from 5.5% in August to 5.8% in September, according to preliminary official statistics. Gasoline fuels have become almost 30% more expensive than last year. Electricity and gas prices rose 7%. And the price increases will not stop here. ING analysts see Polish annual inflation reaching 7% in December.

The ruling party is campaigning, so central bank chief Adam Glapinski, an ally of the government, is in no hurry to take action against inflation through interest rate hikes. The energy market is not yet liberalized, and electoral gifts abound, so the impact of inflation is somewhat masked.

ING analysts see the central bank delivering less on monetary policy than investors expect, which should lead to a depreciation of the zloty. But a weaker zloty would make Polish exports more competitive in international markets, where they would be sold in euros or dollars.

This solution of growth, with weak currency and very cheap credit, was applied until recently by the central bank of Hungary and the Turkish government insists on it. The Hungarian economy was on the verge of entering a currency crisis almost a decade ago, while the Turkish lira has been in an almost continuous decline for several years.

Depreciation usually paves the way for inflation. In Poland, persistent and exaggerated inflation has polarized the views of the central bank’s monetary policy council. In September, several board members proposed raising the reference interest rate from 0.1% to 2%.

Market investors expect the institution to start raising interest rates sometime this year. Great pressure in this regard came recently from 16 former central bank officials, who urged Governor Adam Glapinski to urgently raise interest rates to curb inflation. The group includes former governors Marek Belka, Leszek Balcerowicz and Hanna Gronkiewicz-Waltz, and their call was published in the Rzeczpospolita newspaper.

They pointed out that inflation has been above the central bank’s 2.5% target for two years and that the price indicator is not expected to return to the target even in 2023. If the central bank does not raise interest rates. Failure to do so means that it does not respect its mandate and thus violates the country’s constitution. Inflation is now at its highest level in 20 years.

Glapinski says inflationary factors are transient and inflation will no longer be a problem next year. Hungary’s central bank, led by a former ally of populist prime minister Viktor Orban and who has since become a staunch critic of it, has raised monetary policy interest rates every month since June.

Last month, the pace of the rise slowed, but officials said interest rates will continue to rise until inflation is eased.

As in the case of the Polish government, the one in Budapest seeks to mask the effects of inflation with electoral gifts such as pension increases. Hungary is fast approaching the general election, and this is the first in many years that the ruling party will face real opposition.

At the same time as its Hungarian counterpart, the Czech central bank raised interest rates faster than expected last month and assured that it would continue the rise. Officials there justified the scale of the action by raising energy prices, supply chain disruptions and internal factors such as higher household maintenance costs. And in the Czech Republic, the prime minister, also considered a populist, opposes raising the price of credit because it has slowed economic growth, writes Reuters.

An analysis by Goldman Sachs, a major Wall Street bank, found that Poland, Hungary, the Czech Republic and Romania are more exposed to rising energy prices than the rest of the EU because gas, electricity and utilities are a significant part of the energy basket. consumption, while their energy sources are more polluting.

(source: Mediafax)

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