Sanctions biting in Russia, three key themes for 2023

The fall in the ruble this week is a sign that the new sanctions on Russia’s oil exports are beginning to bite and, if the currency continues to fall, interest rate hikes may come back onto the table in 2023. The impact of tighter sanctions also means that Russia’s current account surplus is set to shrink rapidly over the coming months. And, indeed, a weakening of Russia’s balance sheets is likely to be a key theme in the region in 2023. Outside Russia, two key things to watch next year are Turkey’s election – which presents a fork in the road for the economy and financial markets – and the strength of core inflation in Central and Eastern Europe, which is likely to become even starker.