Turkey’s banks, Russia’s fiscal stimulus

The decision by Turkey’s banking regulator to force banks to reclassify some of their loans as non-performing will raise concerns about the health of loan books, but we think that there are bigger vulnerabilities in the banking sector. Meanwhile, the Russian government’s plan to increase infrastructure spending over the next few years will provide much need support to the Russian economy. Next week, we think that the weak external backdrop means that central banks in Hungary and Czech Republic will look through above-target inflation and keep interest rates unchanged.