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Israel’s virus resurgence, re-opening inflation in CEE

The experience of Israel in recent weeks serves as a reminder that vaccine campaigns across Emerging Europe still have some way to go and that we are likely to have to learn to live with COVID long term. Meanwhile, the breakdown of the June inflation figures released this week for Poland and Czechia showed that price pressures in services sectors have picked up strongly since the re-opening. This may give some more ammunition to the hawks at the Czech central bank but we don’t think it will change the assessment at Poland’s central bank that the rise in inflation this year will be transitory.
Nicholas Farr Assistant Economist
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Emerging Europe Data Response

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Russia’s month-on-month deflation deepened in July as consumer prices fell by a larger-than-expected 0.4% m/m (in y/y terms, the headline rate eased to 15.1%). The disinflationary impact of the strong ruble is likely to fade but with consumer demand so weak we think the headline inflation rate will fall towards 12% y/y by year-end. We think this will prompt a further 100bp of rate cuts, to 7.00%, later this year. Emerging Europe Drop-In (11th Aug): We’re expecting downturns in Central and Eastern Europe, but how bad could it get? Join this 20-minute briefing on our Q3 Outlook report, including the latest on Turkey, Russia and whether Hungary’s forint has further to fall. Register now.

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EU funds will provide a key boost to economies in Central and Eastern Europe in the coming years as the region navigates a challenging macro environment and slowing global growth. Disputes with the European Commission over the rule of law in Hungary and Poland look close to being resolved, but the risk of funds being halted indefinitely remains high and would weigh heavily on growth in both countries. Emerging Europe Drop-In (11th Aug): We’re expecting downturns in Central and Eastern Europe, but how bad could it get? Join this 20-minute briefing on our Q3 Outlook report, including the latest on Turkey, Russia and whether Hungary’s forint has further to fall. Register now.

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Rate hikes nearing an end, CBR’s reform ambitions

The Czech central bank’s decision to keep its policy rate on hold this week, while Romania’s hiked rates, is representative of a growing divergence between central banks in the region. We think Poland’s central bank will be the next to end its tightening cycle, while those in Romania and Hungary will remain hawkish for a few months yet. Elsewhere, Russia’s central bank set out a number of potential measures intended to help the financial system, which show that policymakers are seeking to live with Western sanctions for the long haul.
Emerging Europe Drop-In (11th Aug): We’re expecting downturns in Central and Eastern Europe, but how bad could it get? Join this 20-minute briefing on our Q3 Outlook report, including the latest on Turkey, Russia and whether Hungary’s forint has further to fall. Register now.

5 August 2022

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Manufacturing PMIs (June)

The PMIs for June suggest that manufacturing sectors strengthened in Turkey, Czechia and Poland but weakened in Russia. Meanwhile, in Czechia and Poland, supply chain disruptions intensified, and there was further evidence of price pressures building across the region.

1 July 2021

Emerging Europe Data Response

Economic Sentiment Indicators (June)

The EC’s Economic Sentiment Indicators showed a further rise in regional sentiment in June, driven by improvements in retail and services sectors. That said, there is also continued evidence of growing price pressures in the region, with firms reporting higher selling price expectations across various sectors.

29 June 2021

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Turkey’s quick turnaround, Russia’s latest intervention

The sharp improvement in Turkey’s virus situation has brightened the near-term outlook and presents a risk to our view that the central bank will start an aggressive easing cycle in the coming months. Meanwhile, the temporary export duty imposed on certain metal products in Russia this week is yet another sign that the government is becoming more concerned about the consequences of high and rising inflation.

25 June 2021
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