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Turkey Industrial Production & Retail Sales (Apr.)

Turkey’s activity figures for April suggest that the economy has held up well since last year’s currency crisis, but robust activity has added to inflation pressures and contributed to the widening of the current account deficit, putting the lira under pressure. With interest rate hikes off the cards, sharp and disorderly falls in the currency are a key threat over the coming weeks.
Jason Tuvey Senior Emerging Markets Economist
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Emerging Europe Data Response

Russia Consumer Prices (Jul.)

Russia’s month-on-month deflation deepened in July as consumer prices fell by a larger-than-expected 0.4% m/m (in y/y terms, the headline rate eased to 15.1%). The disinflationary impact of the strong ruble is likely to fade but with consumer demand so weak we think the headline inflation rate will fall towards 12% y/y by year-end. We think this will prompt a further 100bp of rate cuts, to 7.00%, later this year. Emerging Europe Drop-In (11th Aug): We’re expecting downturns in Central and Eastern Europe, but how bad could it get? Join this 20-minute briefing on our Q3 Outlook report, including the latest on Turkey, Russia and whether Hungary’s forint has further to fall. Register now.

10 August 2022

Emerging Europe Economics Update

EU & the rule of law dispute: why do EU funds matter?

EU funds will provide a key boost to economies in Central and Eastern Europe in the coming years as the region navigates a challenging macro environment and slowing global growth. Disputes with the European Commission over the rule of law in Hungary and Poland look close to being resolved, but the risk of funds being halted indefinitely remains high and would weigh heavily on growth in both countries. Emerging Europe Drop-In (11th Aug): We’re expecting downturns in Central and Eastern Europe, but how bad could it get? Join this 20-minute briefing on our Q3 Outlook report, including the latest on Turkey, Russia and whether Hungary’s forint has further to fall. Register now.

10 August 2022

Emerging Europe Economics Weekly

Rate hikes nearing an end, CBR’s reform ambitions

The Czech central bank’s decision to keep its policy rate on hold this week, while Romania’s hiked rates, is representative of a growing divergence between central banks in the region. We think Poland’s central bank will be the next to end its tightening cycle, while those in Romania and Hungary will remain hawkish for a few months yet. Elsewhere, Russia’s central bank set out a number of potential measures intended to help the financial system, which show that policymakers are seeking to live with Western sanctions for the long haul.
Emerging Europe Drop-In (11th Aug): We’re expecting downturns in Central and Eastern Europe, but how bad could it get? Join this 20-minute briefing on our Q3 Outlook report, including the latest on Turkey, Russia and whether Hungary’s forint has further to fall. Register now.

5 August 2022

More from Jason Tuvey

Emerging Europe Economics Weekly

Lira on shaky ground, Russia dropping capital controls

The Turkish lira remained under pressure this week and the raft of policy measures announced on Thursday show that officials are doing whatever they can to avoid interest rate hikes. Capital controls are likely in the event of sharp and disorderly falls in the lira. In contrast, capital controls continued to be rolled back in Russia this week and it seems that policymakers are trying to fight back against the strength of the ruble. But a marked weakening of the currency seems unlikely so long as the current account surplus remains large. Elsewhere, strong inflation and activity data out of Central Europe suggest that further monetary tightening is on the cards.

10 June 2022

Emerging Europe Economics Update

Turkey, the lira and previous currency crises

The Turkish lira has continued to slide and the current backdrop is eerily similar to that which preceded previous currency crises. Sharp and disorderly falls in the lira over the coming weeks are now a real risk.

8 June 2022

Middle East Economics Weekly

OPEC+ talks, strike in Tunisia, Egypt’s bread subsidies

Reports that OPEC+ may suspend Russia from its oil output deal reinforce our view that the Gulf states will raise production faster later this year. Meanwhile, Tunisia’s largest trade union called this week for a national strike in response to government proposals for cuts to the public sector wage bill, underlining that pushing through fiscal tightening will prove difficult and a sovereign default is almost inevitable. And in Egypt, plans to overhaul bread subsidies have been shelved which will require spending to be restrained in other areas to keep the public finances on a sustainable footing.
We are sending this Weekly one day earlier than usual because Capital Economics’ London office is closed on 2nd-3rd June for the Queen’s Platinum Jubilee celebrations.

1 June 2022
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