Will supply constraints hold back the recovery in CEE?

Intermediate goods shortages and pandemic-related supply constraints across Central and Eastern Europe (CEE) are not going to disappear overnight and may hold back the pace of recovery in certain sectors. But they should eventually ease and we remain comfortable with our above-consensus GDP growth forecasts.
Nicholas Farr Assistant Economist
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Emerging Europe Data Response

Poland Activity Data (Dec.)

The latest activity data in Poland show that industry expanded strongly in Q4 but that the shine came off the retail sector amid falling consumer sentiment and surging inflation. We think that GDP expanded by around 6.8% y/y (1.1% q/q) in Q4 which would leave Poland as the best performing economy in the region, but that the recovery will slow a touch at the start of this year.

24 January 2022

Emerging Europe Economics Weekly

Ukrainian markets feel the heat, oil nearing $90pb

Ukraine's financial markets remained under pressure this week as investors appear to have priced in a more serious outcome regarding Russia-Ukraine tensions. A positive reaction to today's talks between the US and Russia has brought some relief but, even if a renewed conflict doesn't materialise, local markets are set to face a difficult few months. Meanwhile, oil prices closed in on $90pb this week and we've revised up our year-end Brent crude forecast to $70pb (from $60pb). This will help support Russia's budget and current account surpluses, but will add 0.2-0.3%-pts to inflation elsewhere in the region and cause current account balances to worsen.

21 January 2022

Emerging Europe Economic Outlook

Mounting headwinds to take the shine off the recovery

We expect regional GDP growth to come in below expectations this year as high inflation erodes households’ real incomes and policy becomes more restrictive. Despite this view on the growth outlook, we think that persistent capacity constraints will mean that inflation ultimately settles at a higher level than is currently appreciated. This feeds into our relatively hawkish interest rate forecasts, particularly in Russia, Poland and Czechia.

20 January 2022

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Emerging Europe Data Response

Central & Eastern Europe GDP (Q2 2021)

The Q2 GDP data for Central and Eastern Europe revealed that the regional recovery gathered pace last quarter as economies reopened following virus waves in Q1. We expect the recovery to remain strong in the second half of this year, although low vaccine coverage clouds the outlook in some economies.

17 August 2021

Emerging Europe Economics Weekly

NBP a bit more hawkish, but poles apart from the CBR

A slew of comments from policymakers at Poland’s central bank (the NBP) this week suggest that the probability of the central bank delivering a rate hike before the end of this year has increased. Elsewhere, remarks from the Russian central bank (the CBR) governor in an interview with The Financial Times reinforce the point that policymakers there will do all they can to reduce inflation expectations. This supports our view that the CBR is likely to deliver another 75bp of hikes by the end of this year.

6 August 2021

Emerging Europe Economics Update

Hawkish CNB flags faster pace of monetary tightening

The Czech National Bank (CNB) raised its two-week repo rate by 25bp to 0.75% at today’s meeting, and its communications signalled that policymakers will raise rates more quickly than they had previously signalled to tackle above-target inflation. We expect that the policy rate will be hiked to 1.50% by end-2021, and 2.50% by end-2022 (previously 1.00% and 2.00%).

5 August 2021
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