Past the worst

The coronavirus crisis has dealt a heavy blow to the economies of Emerging Europe over the past few months but the worst of the downturn now appears to have passed. As infection curves have flattened, most countries have eased lockdowns in recent weeks and activity is rebounding quickly in parts of the region. Large fiscal and monetary support means that we think recoveries will be faster in Central and Eastern Europe compared with Russia and Turkey, although in all cases there will be some long-lasting scars. Financial markets have also recovered some lost ground, with equity markets rallying and central banks’ sovereign bond purchases helping to push down bond yields.
William Jackson Chief Emerging Markets Economist
Continue reading

More from Emerging Europe

Emerging Europe Economics Weekly

Omicron & tightening cycles, Turkey into the unknown

While a lot is still unknown about the Omicron variant, we don’t think it will prevent central banks from delivering further large interest rate hikes - Poland will be a case in point next week, where we expect a 75bp rate hike. The key exception is Turkey, where the departure of Finance Minister Elvan this week adds to signs that policymakers are not prepared to respond to the recent falls in the lira with an orthodox approach. The currency will remain under pressure and this week’s interventions in the FX market suggest policymakers’ tolerance of a weak lira is being tested. These interventions cannot be sustained and soft capital control may be the next port of call.

3 December 2021

Emerging Europe Economics Update

Turkey & the macro fallout from past “sudden stops”

The history books show that currency crises in other parts of the emerging world in recent decades have resulted in peak-to-trough falls in GDP of around 8% on average and pushed headline inflation up by 25%-pts from its latest trough. The latest crisis in Turkey is likely to result in a downturn that sits towards the milder end of the spectrum and, so long as the lira stabilises, the peak in inflation is likely to be in the region of 25-30% y/y in the next few months.

3 December 2021

Emerging Europe Data Response

Turkey Consumer Prices (Nov.)

The rise in Turkey’s headline inflation rate to 21.3% y/y in November will almost certainly be followed by further chunky increases over the coming months that take it to 25-30% as the effects of the recent currency crises continue to filter through. With no sign that President Erdogan will permit an orthodox policy response in the form of large interest rate hikes, the lira will struggle to recoup its losses and inflation will remain at these very high levels throughout much of the next six-to-nine months.

3 December 2021

More from William Jackson

Latin America Data Response

Brazil Industrial Production (Apr.)

The worse-than-expected 1.3% m/m decline in Brazilian industrial production in April is likely to be followed by a partial recovery last month. That said, the latest surveys suggest that activity in the industrial sector hasn’t picked up to the same extent as other parts of the economy.

2 June 2021

Latin America Data Response

Brazil GDP (Q1 2021)

The 1.2% q/q expansion in Brazil’s GDP suggests that the economy held up well during the country’s second virus wave and more timely figures point to a rapid recovery from the more recent third wave. These figures will keep the central bank on track to hike the Selic rate by a further 75bp (to 4.25%) when it meets in June and it looks increasingly likely that it will flag another 75bp hike in August too.

1 June 2021

Emerging Markets Trade Monitor

A closer look at the EM export boom

EM exports are set to hit a new high in Q2, which will help to support economic growth, particularly in East Asia where virus cases are hitting domestic economies. While EM exports are likely to come off their current highs, they will probably stay at elevated levels throughout the rest of the year.

27 May 2021
↑ Back to top