a2873dd348b6497a8d8f56a5911240c8067ac562fd69a3cb5cfcff1456c6e285;;[{"layout":"linklist","uid":2797,"publicationDate":"25 Apr 16:43","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2024_186440.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJMfHK85BPUzZVR54RJg4Hwk=&T=1&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - US 1Q24: Solid GDP growth, higher than expected core inflation ","product":"Data Comment","synopsis":"<p class=\"ucrIndent\"><\/p><\/p><p><ul class=\"ucrBullets\"><li>The US economy expanded at a solid 1.6% qoq annualized rate (or 0.4% non-annualized) in 1Q24. This is a slowdown from the rapid growth of 3.4% in 4Q23 and 4.9% in 3Q23, but only slightly below trend growth of around 2%. The details were stronger than the headline, since GDP growth in 1Q24 was dragged down by the volatile components, with net exports and inventories subtracting a combined 1.2pp from GDP growth. Excluding these volatile components, GDP growth would have been a strong 2.8%.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>The main upward contribution to GDP growth again came from personal consumption expenditure, which rose 2.5% annualized and contributed 1.7pp to GDP growth in 1Q24. The increase in real spending was entirely driven by services, which rose at its fastest pace in two and a half years. Real spending on goods fell slightly, driven by a fall in durable goods, particularly motor vehicles. Strong personal consumption in 1Q24 went hand-in-hand with a jump in imports, which meant net trade provided a large downward contribution of 0.9pp to GDP growth. Real disposable personal income growth slowed in 1Q24, to just 1.1% annualized, and so the increase in spending was largely financed by a fall in the personal savings rate to 3.6% from 4.0%. The personal savings rate is unlikely to keep falling from its historically-low level, particularly if the labor market slows as we expect. If so, personal consumption growth is likely to slow later this year.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>Investment spending rose at a solid 5.3% annualized rate in 1Q24, with both an increase in business investment and a jump in residential investment. Within business investment, the main upward contribution came from intellectual property spending (likely in part reflecting spending on AI), while investment in structures fell slightly, which is the first fall since 3Q22 after which there was a boom due to the financial incentives within the 2022 Inflation Reduction Act and Chips Act. It seems like the boost to activity from these incentives has now faded. The pickup in residential investment (14% annualized) largely reflects the easing of 30Y mortgage rates from 8% at the end of October 2023 to 7% at the turn of the year. Residential investment is likely to soften in 2Q24, reflecting that mortgage rates have since risen to 7.5%.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>The major surprise in the 1Q24 GDP release today was that the core PCE price index (the Fed\u2019s preferred measure of inflation) rose at a 3.7% annualized rate, materially higher than expected. It comes after core PCE inflation hit 2.0% in 4Q23 and 3Q23. Assuming no revisions to past data, it would imply a 0.45% mom rise in the March core PCE deflator (due to be released tomorrow), much higher than our forecast for a 0.3% increase. However, it seems likely that past months (January and\/or February) will be revised up, such that the rise in March is more contained. <\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>The Fed will likely see the 1Q24 GDP report as solid, while the upward surprise to core PCE inflation will support the central bank\u2019s case for waiting longer before cutting rates. At least, it won\u2019t provide the Fed with the \u201cgreater confidence\u201d that it needs (that inflation is sustainably moving down to 2%) to cut rates. Last week we pushed back our expectation for the timing of the first rate cut to September from June previously. We see a total of 75bp of cuts this year, which is dovish compared to market expectations, as we still expect GDP growth to slow and disinflation to resume.<\/p><\/li><\/ul><p class=\"ucrIndent\"><p>Chart 1 plots GDP growth in quarterly annualized terms and year-on-year terms, along with our forecasts through end-2025. We expect GDP growth to slow in the coming quarters.<\/p><\/p><p class=\"ucrIndent\"><p><\/p>","hash":"a2873dd348b6497a8d8f56a5911240c8067ac562fd69a3cb5cfcff1456c6e285","available":"0","settings":{"layout":"linklist","size":"default","showanalysts":"-1","showcompanies":"-1","showcountries":"-1","showcurrencies":"-1","nodate":"0","notitle":"0","noproduct":"0","noflags":"0","dateformat":"d M G:i","nolinktitle":"0","synopsislength":"-1","synopsisexpand":"0","shownav":"0","oldestedition":"","limit":"12"}},{"layout":"linklist","uid":2784,"publicationDate":"23 Apr 12:53","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2024_186426.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJMfHK85BPUzZ_uZH6HdGAWQ=&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Eurozone PMIs: Services drive a slow recovery","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> The eurozone composite PMI for April rose to 51.4 from 50.3, exceeding expectations of a mild increase (UniCredit: 50.8, consensus: 50.7). This is the second consecutive reading above 50 and the highest level since May last year. The improvement reflects a further acceleration in services activity while the pace of contraction in manufacturing intensified. Taken at face value, the outcome signals a moderate acceleration in economic activity at the beginning of the second quarter. This seems consistent with our forecast for a 0.2% qoq increase in 2Q GDP, after a likely 0.1% qoq increase in 1Q (1Q GDP data will be published next week). At country level, the composite PMI edged up above 50 in Germany while it remained only marginally below it in France. The note accompanying the data release for the eurozone indicates that \u201cthe rest of the region\u201d recorded once again the best performance, although this was slightly weaker than in the previous month.<\/li><\/ul><ul class=\"ucrBullets\"><li> Manufacturing remains the weak spot. The main disappointing news was the renewed downward pressure on new orders, the index of which move back to the 43-44 area, while the pace of contraction in output was little changed compared to the previous month. Weak demand conditions eased pressures on supply chains for a third consecutive month. Services activity accelerated amid a further improvement in new and outstanding business. In particular, the new business index recorded the second consecutive increase above 50. <\/li><\/ul><ul class=\"ucrBullets\"><li> The composite PMI for employment improved in April, indicating that the labor market remains resilient. New hiring continued to be driven by the services sector, where firms increased their headcounts at a faster pace amid expectations of future higher levels of activity. In manufacturing, firms reduced their workforce at the slowest pace since September last year.<\/li><\/ul><ul class=\"ucrBullets\"><li> Persistent divergence across sectors is fully reflected in relative trends for prices, with price pressures remaining elevated in services, well-above pre-pandemic levels. Importantly, in services, output price inflation reaccelerated in April as the improvement in demand conditions probably made firms confident of being able to pass on higher input prices to final customers. In manufacturing, both input and output price indexes remained below the 50 threshold. While the input price index increased to the highest level since February last year, the output price index was broadly unchanged and still stuck in the 47-48 area. This indicates that goods inflation is likely to remain well-behaved. <\/li><\/ul><ul class=\"ucrBullets\"><li><strong> Implications for monetary policy: <\/strong> Today\u2019s PMIs leave the ECB on track for a June cut. However, the ongoing strength in the pricing power of services providers is likely to limit the speed at which the central bank will want to dial back monetary restriction. We continue to expect a cumulative 75bp of easing for this year, with one cut of 25bp every quarter. <\/li><\/ul><p class=\"ucrIndent\"><strong>In greater detail: <\/strong> <\/p><p class=\"ucrIndent\">The composite PMI rose to 51.4 from 50.3. The index for manufacturing declined to 45.6 from 46.1, while that for services increased to 51.9 from 51.5, its highest level since May last year.<\/p>"},{"layout":"linklist","uid":2774,"publicationDate":"21 Apr 15:01","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2024_186416.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJMfHK85BPUzZbV9BSVBOBB8=&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Sunday Wrap","product":"Sunday Wrap","synopsis":"<ul class=\"ucrBullets\"><li> Geopolitics is indeed bad. US-China relations are deteriorating rapidly as economic policies adjust to support the national security concerns.<\/li><\/ul><ul class=\"ucrBullets\"><li> The risk of a Trump victory in November and what it may mean for the US and the world. Spoiler: Not good!<\/li><\/ul><ul class=\"ucrBullets\"><li> The economic outlook is fundamentally more uncertain than at any time during the 40 years I have come to IMF annual and spring meetings. Discussions about economic policies often seemed disjointed. A few observations on particularly US fiscal and European monetary policies.<\/li><\/ul>"},{"layout":"linklist","uid":2770,"publicationDate":"19 Apr 14:06","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2024_186412.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRoNM4Q6WQS0n-zr0WxttQDmA==&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"CEE Data Watch","product":"EEMEA Macro Note","synopsis":"<p class=\"ucrIndent\">The highlights next week are the central bank meetings in Hungary, Turkey and Russia, and the presidential elections in North Macedonia. Fitch will review Bulgaria\u2019s sovereign rating and S&P will review Hungary\u2019s and Slovakia\u2019s sovereign rating. We expect no changes.<\/p>"},{"layout":"linklist","uid":2769,"publicationDate":"19 Apr 13:52","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2024_186411.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJMfHK85BPUzZRgM4NLkeUpk=&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Comparing Germany\u2019s trade risk with China","product":"Chart of the Week","synopsis":"<p><ul class=\"ucrBullets\"><li>Chancellor Olaf Scholz\u2019s recent trip to China has again triggered a public discussion about the German economy\u2019s dependence on China. Where do we currently stand' Our latest Chart of the Week shows one simple but crucial yardstick for Germany but also for other major industrialized countries over time: trade in goods with China and Hong Kong (HK), as a share of each national GDP.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>Accordingly, there are signs of a moderate \u201cde-risking\u201d. For instance, Germany\u2019s traded goods with China & HK were worth nearly 5% of national GDP in 2023 compared to more than 6% in 2022 and roughly 5% in 2019 before the start of COVID-19. At the same time, Germany\u2019s traded goods with the rest of the world were higher in 2023 (66% of GDP) than in 2019 (with less than 65%), i.e. the decline in trade with China has been a distinct pattern. The major driver for the temporarily rising dependence in 2022 was probably the start of the Russia-Ukraine conflict which led to a rerouting of import flows. Especially petrochemical goods previously imported from Russia were (temporarily) replaced by goods produced in China, where huge petrochemical capacities exist.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>Of course, apart from a deliberate shift in strategy of German companies, cyclical factors might also have played an important role in reducing the trade dependency on China. For instance, anemic growth in China has \u201cquasi-automatically\u201d limited the potential for further rises in German exports and will probably continue to do so, at least in 2024 and 2025.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>In respect to other major industrialized countries, the trade dependency on China has also recently decreased, although it still has remained at (much) higher levels in the case of South Korea and Japan. For instance, South Korean exports and imports to China & HK accounted for more than 17% of national GDP in 2023 compared to 20% in 2022 and less than 17% in 2019. In the case of France and Italy, trade ratios were far lower but still somewhat above their pre-pandemic levels in 2023, with 2\u00bd% and 3\u00bd%, respectively.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>Going forward, we think that a further gradual, but long-lasting \u201cde-risking\u201d is likely in major industrialized countries. The most important reasons are the strategic competition between the US and China, the Russia-Ukraine war and related national security concerns in key industries such as semiconductors but also companies\u2019 efforts in putting more weight on the resilience of supply chains instead of efficiency. The latter factor will probably play a major role in the case of Germany, as signalled by recent surveys which flag companies\u2019 attempts in diversifying their suppliers and increasing their insourcing activities.<\/p><\/li><\/ul>"},{"layout":"linklist","uid":2765,"publicationDate":"19 Apr 10:01","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2024_186407.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRozxsvVNKkJg3RSzi3ly2SLA==&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"EEMEA Macro Flash - Croatian elections: tough negotiations ahead with HDZ in pole position to form a government","product":"EEMEA Macro Note","synopsis":"<p><ul class=\"ucrBullets\"><li>In Wednesday\u2019s election, the ruling party, the Croatian Democratic Union (HDZ; center right), together with a group of smaller parties, won the most seats (61 of 151), but this was not sufficient for a majority. This was broadly in line with expectations.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>The main opposition group, the coalition led by the Social Democratic Party (SDP; center left), supported by President Zoran Milanovi', received 42 seats.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>HDZ, led by incumbent Prime Minister Andrej Plenkovi', is the most likely party to lead the next government, but forming a coalition will likely involve tough, and potentially lengthy, negotiations.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li><strong>We see three potential outcomes: <\/strong> the most likely is a coalition between HDZ, the Homeland Movement (DP) and national minority representatives; a less likely option is one in which DP is replaced by Most; the least likely option is a coalition of opposition parties led by SDP.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>Unless the third option materializes, President Milanovi', will likely remain in his post until the presidential elections in December.<\/p><\/li><\/ul><p class=\"ucrIndent\"><p>The results of the elections on Wednesday were in line with expectations. The ruling HDZ party (together with some small parties) won the most seats, but this was not sufficient for a majority.<\/p><\/p><p class=\"ucrIndent\"><p>The HDZ-led group won 61 seats out 151, five less than in the previous elections of 2020, while the main opposition group, the SDP-led coalition Rijeke pravde (Rivers of Justice) won 42 seats, one more than in the previous elections. The SDP-led coalition was supported by President Milanovi', who has signaled his aspiration to become prime minister, although he was not allowed to run as an official candidate in the elections (this would have required him to resign from his position as head of state, which he refused to do).<\/p><\/p><p class=\"ucrIndent\"><p>Regarding the other parties, Homeland Movement (DP; conservative right) won 14 seats (two less than in the previous election); Most (Bridge; right) won 11 seats (three more) and Mo\u017eemo! (We Can!; left), which leads in the Croatian capital, Zagreb, confirmed itself at the national level by winning ten seats (three more than its showing in 2020). The rest of the seats went to two regional parties (Istrian Democratic Union [IDS]) in Istria two seats and Independent Platform North (NPS) in Northwestern Croatia, also two seats) and a liberal party (Fokus), which won one seat. Eight seats go to national minorities\u2019 representatives.<\/p><\/p><p class=\"ucrIndent\"><p>At the time of writing, all votes have been processed, but the final results will be confirmed only once the State Electoral Commission confirms the validity of the election process in the coming days, which will also require repetition of the election process in some electoral locations due to confirmed irregularities (this is the usual procedure if such irregularities occur and generally has a minor impact on the overall results).<\/p><\/p>"},{"layout":"linklist","uid":2759,"publicationDate":"17 Apr 15:10","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2024_186400.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJMfHK85BPUzZsvDXz5EXu6Y=&P=1","protectedFileLinkDe":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2024_186404.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJMfHK85BPUzZiaaJy-KquDg=&P=1","protectedFileLinkIt":""},"title":"Oil Update - Oil prices are likely to gradually decline","product":"Oil Update","synopsis":"<p><ul class=\"ucrBullets\"><li>So far, the reaction of oil prices to Iran's attack on Israel has been contained. Given the diplomatic pressure by Western powers, investors expect Israel to adopt a restrained response against Iran.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>We agree with the market and we continue to expect tensions in the Middle East to remain mostly limited to the Gaza Strip, with limited regional fallout. For this reason, and given market fundamentals, we expect Brent prices to move back towards USD 85\/bbl soon.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>An escalation of tensions, instead, involving an unrestrained retaliation by Israel, a blockade of the Strait of Hormuz, or attacks on oil facilities in Saudi Arabia, would likely push Brent prices above USD 100\/bbl.<\/p><\/li><\/ul><p class=\"ucrIndent\"><p>So far, the reaction of oil prices to Iran's attack on Israel has been contained. After crossing USD 92\/bbl last Friday, Brent is now trading below USD 90\/bbl. The market already priced in a major attack on Israel since Teheran preannounced it but has found comfort in the limited damages and in the diplomatic efforts by Western and regional powers in avoiding an escalation of tensions. There is still a lot of uncertainty about how tensions in the region will unfold, but we continue to see a regional conflict involving direct conflict between Israel and Iran as unlikely -- which explains the muted reaction of oil prices.<\/p><\/p><p class=\"ucrIndent\"><p>The different fronts<\/p><\/p><p class=\"ucrIndent\"><p>Teheran\u2019s preannounced attack on Israel over the weekend, which involved hundreds of missiles and drones, was likely an isolated response to the suspected Israeli strike in Syria at the beginning of the month that killed Iranian military officers in the Iranian embassy in Damascus. It seems it was not intended to mark the beginning of a broader regional conflict at a time when the Iranian regime is already busy keeping order at home. On Sunday, Iran\u2019s permanent mission to the UN, tweeted: \u201cThe matter can be deemed concluded\u201d.<\/p><\/p><p class=\"ucrIndent\"><p>Furthermore, no major regional actor wants an escalation in tensions.. In an official statement that was released today, Saudi Arabia and the United Arab Emirates (UAE) called for maximum \u201cself-restraint\u201d in the Middle East to avoid \u201cthe dangers of war and its dire consequences\u201d. The UAE has formal diplomatic ties with Israel, while relations with Saudi Arabia have been improving in recent years. Similarly, Western powers are calling for restraint on Israel\u2019s side. The G7 officially condemned Iran\u2019s attack, and while the US reiterated its commitment to Israel\u2019s defense, it warned that it will not participate in any offensive action against Iran.<\/p><\/p><p class=\"ucrIndent\"><p>The Israeli government is clearly split on how to react. The hawks are pushing for a military response for fear of looking weak and encouraging further attacks from Iran. Options range from strikes on Iran\u2019s nuclear facilities or military bases within the country to cyberattacks or attacks on Iran\u2019s proxies in Lebanon or Yemen. The doves call for a tough diplomatic response from the West in order to focus all military efforts on the war in Gaza. Initially, the doves seemed to have prevailed. In an official statement that was released on Sunday, the government led by President Benjamin Netanyahu asked for: 1. The immediate recognition of the Iranian Revolutionary Guards Corps as a terrorist organization and 2. The imposition of tougher sanctions against Iran. The statement referred directly to sanctions on missiles. But then the hawks took over. On Monday night, Military Chief of Staff Herzi Halevi declared that Israel would respond militarily to Iran\u2019s attack, without providing any detail on the possible options.<\/p><\/p><p class=\"ucrIndent\"><p>Now, doves and hawks are battling again on what comes next. A meeting of Israel\u2019s war cabinet set for yesterday was put off until today, as Western allies are putting in place a package of sanctions against Tehran to dissuade Israel from a major escalation. In general, Israel feels constrained not just diplomatically, but also militarily. The weekend events highlighted that, without US support, its defense capabilities are limited. Moreover, Israel benefited from the support of the Middle East Air Defense Alliance, which involves the US, Israel and some allied Arab countries (along with the UK and France). Without the support of its Western allies to undertake a bolder response against Teheran, Israel has little incentive to go on the offensive. It can actually claim victory that it was able to intercept the Iranian missiles and defend its territory, particularly after the Hamas-led 7 October attacks had put this into question. And it can concentrate its military efforts in the war against Hamas in the Gaze Strip.<\/p><\/p><p class=\"ucrIndent\"><p>A drop in oil prices is our baseline<\/p><\/p><p class=\"ucrIndent\"><p>Even if the situation is extremely fluid and the degree of uncertainty extremely elevated, our baseline scenario assumes that Israel will likely opt for a restrained response, relying more on diplomatic than military action. There might be a military response, but that would probably be largely symbolic and not trigger an Iranian retaliation. When it comes to sanctions and the oil market, it is possible that the US will choose to better enforce existing sanctions on Iranian oil, without fully removing the around 1.5mb\/d that Tehran is smuggling into the global market. Since the beginning of the war in Ukraine, Western powers have not fully enforced sanctions on Iranian oil exports to contain upward price pressures, given the market distortions created by sanctions on Russian oil. With the presidential elections approaching, US President Biden is likely to act cautiously on tightening Iranian oil sanctions, because tighter oil supply would risk fueling inflationary pressure domestically at a time when inflation is weighing on his popularity despite a solid economy, adding to risks that the Fed might have to delay rate cuts.<\/p><\/p><p class=\"ucrIndent\"><p>Given all these considerations, our baseline scenario is that the conflict in the Gaza Strip does not further escalate into a clash between regional powers but will have only limited fallout in the region. This implies that no major oil facilities or trading routes (the Strait of Hormuz, in particular) will be affected, while Iranian oil exports will be only partly curtailed. At the same time, according to the latest update of the International Energy Agency, global oil demand is losing momentum now that the post-Covid rebound is largely complete, an expanding EV fleet acts as a further drag and China\u2019s economic performance disappoints (Chart 1).<\/p><\/p>"},{"layout":"linklist","uid":2744,"publicationDate":"14 Apr 11:59","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2024_186385.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJACkeUMzD3sVemA1nxpvuc0=&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Sunday Wrap","product":"Sunday Wrap","synopsis":"<ul class=\"ucrBullets\"><li> The US is countering China on at least three fronts ...<\/li><\/ul><ul class=\"ucrBullets\"><li> The changed relationship between the US and China will ...<\/li><\/ul>"},{"layout":"linklist","uid":2743,"publicationDate":"12 Apr 14:05","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2024_186384.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRobEKVsp7ObefiamXYmcmx7Q==&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"CEE Data Watch","product":"EEMEA Macro Note","synopsis":"<p class=\"ucrIndent\">Next week\u2019s highlight will be the general elections in Croatia. <\/p>"},{"layout":"linklist","uid":2726,"publicationDate":"09 Apr 15:16","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2024_186366.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJACkeUMzD3sVU_uBRzW76pk=&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Two months to go before the European election","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> The upcoming European Parliament (EP) election is due to take place on 6-9 June 2024. Our Chart of the Week provides an update of indications from opinion polls, in terms of the number of seats political groups are expected to win compared to six months ago and compared to the number of outgoing MPs elected in 2019. <\/li><\/ul><ul class=\"ucrBullets\"><li> Compared to six months ago, the main trends appear to be the following. There has been an increase in the number of seats projected to be won by the center-right European People\u2019s Party (EPP), and, according to national polls conducted in the main EU countries, this looks to mirror an improvement in the prospects of the Italy\u2019s Forza Italia, the Spanish Partido Popular and the German CDU-CSU. In March, the EPP formally nominated President of the European Commission Ursula von der Leyen as its Spitzenkandidat. <\/li><\/ul><ul class=\"ucrBullets\"><li> In contrast, polls suggest there has been a decline in the number of seats likely to be won by the center-left Socialists and Democrats Group (S&D). Moreover, Renew Europe has continued to lose ground over the last six months, as the French Renew coalition has suffered a further decline in popularity, especially compared to the French Rassemblement National, which belongs to the Identity and Democracy Group (ID). In Germany, Italy and Spain, the popularity of parties affiliated with Renew Europe does not seem to be taking off. While seat polls had shown gains by the ID compared to six months ago, those gains have partly faded in the latest polls. Lastly, progress by the European Conservatives and Reformists Group (ECR) has slowed to a halt recently. <\/li><\/ul><ul class=\"ucrBullets\"><li> When recent polling is compared with the composition of the outgoing European Parliament, it seems to confirm a decline in support for the liberal-centrist grand coalition formed by the EPP, the S&D and Renew, mainly in favor of the ECR and ID groups. Still, the grand coalition is likely to hold, albeit with a contained margin compared to the 361 seats needed for a parliamentary majority. The Greens\/European Free Alliance (Green\/EFA) is also set to lose seats in the new parliament. At the same time, and despite their ideological differences, the EPP and ECR are unlikely to be able to win enough votes to form a majority coalition. Even when one considers that the ID group might do well, a potential coalition composed of the EPP, ECR and ID might not gather enough votes to win a majority and, above all, continues to appear unlikely, in our view. It remains that, even if the right-wing groups (ECR and ID) are not part of the governing coalition despite an increase in their representation, they might play a key role in shaping alliances in the new parliament on issues where there is dissent within the ranks of EPP, S&D and Renew, potentially affecting future EU policy, particularly on immigration and the EU\u2019s green transition.<\/li><\/ul>"},{"layout":"linklist","uid":2719,"publicationDate":"08 Apr 15:17","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2024_186359.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRo0vkDVpTDJx1MxThkzF3htw==&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"EEMEA Macro Flash - Slovakia: presidential election consolidates government power","product":"EEMEA Macro Note","synopsis":"<ul class=\"ucrBullets\"><li> Peter Pellegrini, chairman of Slovakia\u2019s parliament and candidate of the country\u2019s governing alliance, was elected as the president of Slovakia on Saturday.<\/li><\/ul><ul class=\"ucrBullets\"><li> Mr. Pellegrini\u2019s main impact as president will be felt when he appoints a new head of the intelligence agency, three members of the Judicial Council and two judges at the Constitutional Court. <\/li><\/ul><ul class=\"ucrBullets\"><li> The government\u2019s stronger hold on power bodes ill for democracy and the rule of law in Slovakia, given recent attempts to weaken the fight against corruption. Because of this, Slovakia risks losing access to EU transfers.<\/li><\/ul><ul class=\"ucrBullets\"><li> The budget deficit is likely to exceed 6% of GDP in 2024, similarly to 2023, thus spending limits are likely to be breached.<\/li><\/ul><ul class=\"ucrBullets\"><li> We expect SLOVGBs to underperform their peers, despite that Slovakia\u2019s Debt and Liquidity Management Agency (ARDAL) has covered approximately 70% of Slovakia\u2019s funding needs this year. <\/li><\/ul><p class=\"ucrIndent\">The presidential election held in Slovakia on Saturday was won, with 53% of the vote, by Mr. Pellegrini, who is the current leader of Hlas-SD. In the second round of voting, he defeated the independent candidate and former minister of foreign affairs, Ivan Kor'ok, who won the first round of voting with the support of the pro-European opposition. Mr. Pellegrini managed to mobilize voters at the last moment, especially many supporters of the strongly Eurosceptic and pro-Russian candidate, \u0160tefan Harabin, who received almost 12% of the vote and came third in the first round, and from the Hungarian minority. Mr. Pellegrini received significant support from Hungarian media during the election moratorium period. The turnout reached 61% in the second round, the highest turnout for a presidential election in Slovakia since 1999. It increased by almost ten percentage points compared to the first round (52%).<\/p><p class=\"ucrIndent\">The powers of the president are predominantly representative and appointive. The president also has significant powers pertaining to foreign policy, although most of them have been transferred to the government by past presidents. The president still participates in NATO meetings, while competencies regarding the EU have been formally transferred to the government. A pro-government president will help strengthen the government's internal power in the country. The new president will first appoint a new head of the intelligence agency, which outgoing President Zuzana 'aputov\u00e1 has temporarily blocked. From the perspective of consolidating power, appointive powers in the judiciary seem crucial. The president appoints 3 out of 18 members of the Judicial Council (the judicial oversight body), with 3 members being appointed by the government and parliament and 9 elected by judges. The president also appoints judges at the Constitutional Court, choosing from candidates proposed by parliament (there are twice as many candidates as judges). <\/p><p class=\"ucrIndent\">After the current government tried repeatedly to water down anti-corruption legislation, the last major domestic barrier protecting democracy and the rule of law in Slovakia remains the Constitutional Court. Most constitutional judges were elected in 2019 for a term of 12 years. Only one constitutional judge\u2019s term ends during this parliamentary term (in 2026), while another position became vacant in the fall, after the resignation of one judge. The parliament has not yet selected candidates from whom the president can choose. The government coalition has already considered taking control of the Constitutional Court by expanding the number of judges. However, the government lacks the parliamentary constitutional majority to implement this plan. An external constraint to such changes is the threat that Slovakia\u2019s access to EU funds could be suspended. This prospect has already forced the current government coalition to partially adjust proposed changes several times.<\/p><p class=\"ucrIndent\">The government coalition says it is committed to consolidating public finances. However, this year's consolidation is, in our view, an accounting exercise, relying mostly on reallocating EU-funded energy aid from 2023 to this year. Eurostat is unlikely to accept this, in our view. Therefore, we assume that the budget deficit will increase from 6.3% of GDP this year from 6.1% of GDP in 2023 (more details can be found on pages 65-66 of our 2Q24 CEE Quarterly). The approved budget does not meet local spending limits to which the government committed in its bid for funds from the Recovery and Resilience Facility. Therefore, a penalty of up to EUR 200mn is expected. In the coming years, instead of tightening spending limits, the government intends to follow new EU rules (and spending limits). The contours of consolidation are currently unclear. The budget deficit is expected to decrease by 0.7-1.0pp per year in the near future. Concerns about losing access to financial markets or increasing risk premiums have led ARDAL to accelerate the issuance of new debt. So far this year, ARDAL has issued EUR 7.123bn of bonds, out of an estimated need amounting to EUR 10-11bn, i.e. approximately 70% of the annual planned issuance.<\/p><p class=\"ucrIndent\">Despite good issuance, we expect SLOVGBs to underperform their peers. Their yield spread to SLOREP bonds has widened to 45-50bp this year at the 10Y maturity, and further widening could be in the cards if EU transfers are frozen and the budget deficit fails to be adjusted. <\/p>"},{"layout":"linklist","uid":2713,"publicationDate":"07 Apr 13:23","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2024_186353.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJACkeUMzD3sVKttnV97OPnk=&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Sunday Wrap","product":"Sunday Wrap","synopsis":"<ul class=\"ucrBullets\"><li> I\u2019ll discuss the underlying difference between the US and European inflation pictures as it now reveals itself, the difference focus of Fed vs ECB communication - and the key issues it raises for policies going forward.<\/li><\/ul><ul class=\"ucrBullets\"><li> I\u2019ll then briefly review the biggest geopolitical risks during 1Q, arguing that some have intensified while others have eased \u2013 and what they tell us about the year ahead.<\/li><\/ul>"}]