Disinflation takes hold in CEE, Russia’s budget pressures

This week brought the clearest evidence yet that the disinflation process in Central Europe is underway as most economies experienced a broad-based easing of price pressures in December. This is likely to continue and we think that central banks will start cutting interest rates later this year. Elsewhere, Russia's finance ministry announced that the budget deficit amounted to a larger-than-expected 2.3% of GDP in 2022 and we expect falling energy revenues to put more pressure on the public finances this year. This will further erode Russia's macro stability and sanctions resilience.