Manufacturing PMIs (May)

The manufacturing PMIs repeat the message from the ESIs released last week that activity in the region rebounded in May but remained at subdued levels. As lockdowns continue to be lifted and external demand improves, we expect manufacturing output to recover further over the coming months.
Jason Tuvey Senior Emerging Markets Economist
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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

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Middle East Economics Update

Iran: nuclear deal, elections and the economy

Negotiators appear to be closing in on an agreement to revive Iran’s nuclear deal which, if revitalised, would provide a substantial lift to Iran’s economy – it could plausibly expand by 8-10% per year in 2021-23. Higher Iranian oil output would act as a drag on global oil prices and could prompt governments in the Gulf countries to keep fiscal policy tight, weighing on their recoveries.

7 June 2021

Emerging Europe Economics Weekly

Erdogan piles on the pressure, Israel’s surprise coalition

Talk this week of rate cuts in Turkey has led to further falls in the lira and, ironically, means that the central bank will stand pat at this month's MPC meeting. In Israel, the coalition proposal formed to topple incumbent PM Benjamin Netanyahu is so fractured we don't think it will lead to major changes in economic policy. Finally, the announcement by Russia's government to de-dollarise its National Wealth Fund assets won't have an economic impact, but it is a clear move ahead of the Biden-Putin summit this month that Russia sees its future as isolated from the West.

4 June 2021

Emerging Europe Data Response

Turkey Consumer Prices (May)

The latest falls in the lira mean that, despite the fall in Turkey’s headline inflation rate to 16.6% y/y last month, the central bank (CBRT)will probably leave interest rates unchanged at this month’s MPC meeting. But the CBRT is likely to fulfil the president’s desire for monetary loosening by August.

3 June 2021
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