SARAJEVO (Bosnia and Herzegovina), December 18 (SeeNews) – The European Bank for Reconstruction and Development (EBRD) said on Friday that countries in Central and Southeast Europe (CSEE) are likely to be less exposed to the US rate hike due to their closer ties to the Eurozone.
On Wednesday, the US Federal Reserve, for the first time in nearly a decade, raised interest rates by 0.25 percentage points to the target range of between 0.25% to 0.5%.
Although the long-expected hike will likely increase market volatility and the cost of funding in EBRD countries, countries with close links to the eurozone (Central Eastern and South Eastern Europe) will continue to benefit from accommodating monetary policy by the European Central Bank (ECB), translating into lower interest rates and better trade prospects, the EBRD said in a press release.
While high portfolio debt stocks in CSEE countries renders them vulnerable to rising international funding cost, a large share of Eurozone-based investors, surpluses or ongoing adjustment in current accounts, as well as in some cases existing IMF programmes, will help to offset the detrimental impact of the US rate increase on their growth, the EBRD said.
“Eurozone lending surveys and credit growth turned markedly more positive in September. At the same time, bank data from the CESEE Deleveraging and Credit Monitor, published by the Vienna Initiative showed a marginal uptick in exposures for the first time in fours years in the CSEE economies."
The EBRD concluded that falling commodity prices in the short term will support growth in the region.