OPEC deal won’t derail Russia, lira rally may be short-lived

The rollover of OPEC’s oil production quotas – announced this week – will be an unhelpful headwind for Russia’s economy, but it is unlikely to prevent growth from picking up in the second half of 2019. Meanwhile, this week’s rally in the Turkish lira could quickly go into reverse if US President Trump’s conciliatory comments regarding Turkey’s purchase of Russian defence equipment prove to be a false dawn.
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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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Emerging Europe Economics Update

Hungary: surveys point to a fresh pick-up in core inflation

A raft of survey data suggests that last month’s fall in Hungarian core inflation is unlikely to mark the start of a downward trend – as the central bank anticipates. We expect that underlying price pressures will build over the coming quarters, prompting more monetary tightening.

26 July 2019

Emerging Europe Economics Update

Polish investment boom has further to run

A further sharp rise in EU structural fund inflows will support strong Polish fixed investment growth over the next couple of years. But that won’t be enough to prevent overall GDP growth from slowing.

16 July 2019

Emerging Europe Economics Update

Romania: current account risks mount

Strong domestic demand means that Romania’s current account deficit, which is already among the largest of any major EM, is likely to widen further. This makes the leu increasingly vulnerable to a deterioration in investor sentiment and is likely to prompt more monetary tightening than most anticipate.

15 July 2019
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