Russia Activity Data (Jun.)

Russian activity data for June showed that the economy expanded at a solid pace in Q2, with overall GDP probably returning to just shy of its pre-pandemic level. While the re-opening boost will fade in Q3, we think that the economy will continue to grow at a strong pace.
Liam Peach Emerging Markets Economist
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Emerging Europe Economics Weekly

Lira crisis, MNB hikes, Ukraine-IMF, Romanian politics

This week has been dominated by the collapse in the Turkish lira and all our research on the crisis can be found here. While Turkey’s problems have been driven by a ‘head-in-the-sand’ approach to inflation and falls in the lira, Hungary’s central bank tightened policy further this week amid signs that officials across Central Europe are taking the inflation fight more seriously and becoming less tolerant of currency weakness. Elsewhere, the early signs are that a new grand coalition in Romania does not have the appetite for much-needed austerity. Finally, the latest tranche of IMF funds provide a welcome boost for Ukraine’s economy.
Drop-In: Why is Asia sitting out the global inflation surge? 09:00 GMT/17:00 HKT, Thursday 2nd December https://event.on24.com/wcc/r/3546145/A9D34EF592141BEFCAC819ADB40359D5?partnerref=report

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Emerging Europe Economics Update

Turkey: how strong is the fiscal picture?

Turkey’s public finances have become more vulnerable to falls in the currency in recent years, although we think the likelihood of sovereign default is very low. Perhaps the bigger risk for the public finances is that the pressure on the central bank to focus on growth is matched by a shift to a looser fiscal stance, causing the debt dynamics to worsen.

25 November 2021

Emerging Europe Economics Update

Macro fundamentals to support further shekel strength

The Israeli shekel has appreciated sharply in the past few weeks, making it one of the best performing currencies during the pandemic. While we don’t expect this recent strength to continue in the very near term, we think that Israel’s macro fundamentals will support further appreciation over the next few years. In view of the wider interest, we are also sending this Emerging Europe Update to clients of our FX Markets service.

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MNB steps up front-loaded tightening cycle

The larger-than-expected 30bp interest rate hike by Hungary’s central bank (MNB) today was accompanied by hawkish comments that send a strong message about its intention to bring inflation back to its target. The tightening cycle is likely to be sharper than we had expected, with the base rate rising from 1.20% now to 2.20% in this cycle (versus our previous forecast of 1.70% by early 2022).

27 July 2021

Emerging Europe Economics Update

CBR hikes rates sharply, but cycle nearing an end

Russia’s central bank (CBR) opted for a larger 100bp interest rate hike, to 6.50%, at today’s meeting and the accompanying communications provided clear guidance that the tightening cycle is nearing an end. With inflation likely to rise further and inflation expectations to remain elevated, we think that there will be a further 75bp of interest rate hikes, to 7.25%, at the next two meetings in September and October.

23 July 2021

Emerging Europe Economics Update

Israel and the Delta variant: what we know so far

A rise in virus cases in Israel has prompted the government to re-impose restrictions on activity, including mask mandates and vaccine certification for large events. There are signs that the Pfizer vaccine may be much less effective at preventing infection against the Delta variant and that vaccine efficacy fades over time, prompting the introduction of booster jabs. So far there is little evidence to suggest that the vaccine is much less effective at preventing severe illness. While the re-opening of international tourism is likely to be delayed, restrictions on the domestic economy look set to remain light-touch.

23 July 2021
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