EU vaccine row, MNB asset purchases, CBRT impresses

The risk of a large shortfall in COVID-19 vaccine deliveries to the EU threatens to delay the recovery that we had expected in Emerging Europe during the first half of this year. While the central bank of Hungary kept its main policy rates on hold this week, we think its decision to step up its asset purchase programme will be followed with a cut to short-term interest rates in the coming months. Finally, the Turkish central bank’s Inflation Report provided a (rare) realistic assessment of the outlook and offers further evidence that the shift to orthodoxy will stick.
Bethany Beckett 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

More from Bethany Beckett

Capital Daily

US payrolls and Treasury yields

Although the 10-year Treasury yield hardly moved after today’s release of the US Employment Report for June, we still expect it to resume its rise before long.

2 July 2021

FX Markets Update

Weighing up the prospects for the NOK

We think that the Norwegian krone will continue to strengthen against the euro over next year or so. This is despite our forecast for a pull-back in oil prices and reflects our view of the relative prospects for monetary policy in Norway and the euro-zone.

1 July 2021

Capital Daily

We think that returns from US corporate bonds will underwhelm

US corporate credit spreads have reached post-Global-Financial-Crisis (GFC) lows in recent weeks. So, despite our forecast for a healthy US economy, we expect US corporate bonds to outperform Treasuries only very slightly.

22 June 2021
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