Russia’s giveaways, NBP’s hawkishness, Turkey and SDRs

Russia's government this week unveiled new lump-sum payments to pensioners and military personnel ahead of September's election, strengthening our above-consensus views on inflation and interest rates. Meanwhile, the minutes of the Polish central bank's July meeting highlighted more clearly the criteria for starting to raise interest rates: while there is a growing chance that the criteria are met in November, for now we're keeping our forecasts for tightening to start in 2022. Finally, Turkey received its $6.3bn SDR allocation from the IMF this week. While helpful, it's a drop in the ocean compared to Turkey's large external financing needs.
Liam Peach Emerging Markets Economist
Continue reading

More from Emerging Europe

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

26 November 2021

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.

24 November 2021

More from Liam Peach

Emerging Europe Economics Update

MNB hints at slower tightening, tapering takes stage

Hungary’s central bank (MNB) raised its base rate by another 30bp, to 1.50%, as expected today but also dropped its commitment to raise interest rates on a monthly basis which suggests that the tightening cycle will probably slow after September’s Inflation Report The MNB also laid out plans for phasing out its asset purchase programme, but its communications suggest that it will be a very gradual taper.

24 August 2021

Emerging Europe Economics Update

BoI maintains its dovish tone as outlook dims

Israel’s central bank (BoI) sounded more cautious about the outlook at today’s MPC meeting given the rise in virus cases and tightening of containment measures. Provided the third booster jab is effective and restrictions are not tightened significantly, we think the central bank will give guidance on ending its asset purchase programme later this year. But we maintain our view that interest rate hikes are some way off.

23 August 2021

Emerging Europe Economics Weekly

Romania’s fiscal risks, Israel’s 4th wave, CBRT pressure

Romania's new finance minister has a tough job ahead to keep the public finances on a sustainable path, especially as the PM is seeking to raise spending. Elsewhere, Israel's fourth virus wave has gone from bad to worse and there are now clear signs that this has taken its toll on consumer confidence. The central bank is likely to flag the downside risks to the outlook at its meeting on Monday. Finally, the minutes to the latest Turkish central bank decision suggest that policymakers are rowing back on previous commitments to avoid raising interest rates in the face of high inflation.

20 August 2021
↑ Back to top