The region’s two largest economies – Russia and Turkey – have continued to struggle over the past month. Russia’s economy appears to have contracted sharply by around 3% y/y in Q1. Meanwhile, we estimate that growth in Turkey slowed to a sluggish 1.5% y/y or so in the first quarter of the year. And while the recent rally in the ruble means that Russia’s central bank has some (albeit modest) room to cut interest rates, in Turkey, growing political concerns have caused the lira to tumble further, meaning that interest rate cuts are out of the question. If anything, tighter monetary policy is starting to look more likely.
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