COVID-19 outbreaks diverge, booster shots rolled out

The past month has seen a growing divergence in COVID-19 outbreaks across the region, with cases still very low in Central Europe but surging in Israel and Turkey. Either way, it appears that restrictions will remain light touch and economic recoveries should stay on track. But studies showing that vaccine efficacy fades over time mean that booster shots look set to become the norm.
Jason Tuvey Senior Emerging Markets Economist
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COVID-19 outbreaks have surged across the region in the past month. Record high daily cases have been reported in Russia, Romania, Bulgaria and Latvia and infections are rising sharply elsewhere. Governments have tightened containment measures, including a four-week lockdown in Latvia and closures of hospitality services in Russia. 40-60% of people in most countries have received two vaccine doses, but rollouts have slowed and the spread of a new, highly transmissible subvariant (so-called “Delta plus”) highlights that much higher vaccine coverage is needed to supress outbreaks on a sustainable basis. Most countries are unlikely to follow Israel’s lead in rolling out booster jabs quickly and it is likely that governments will tighten restrictions further in the coming weeks. This will add to the headwinds from surging inflation and supply disruptions in industry and provides another reason to think that GDP growth will slow in Q4.

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Surging virus cases and the re-imposition of lockdowns

A renewed wave of COVID-19 cases has prompted some governments to reimpose strict containment measures across Emerging Europe and talk of lockdowns is now becoming more widespread. The experience so far during the pandemic is that tighter containment measures need not result in a large hit to activity. But the latest virus waves add to the growing near-term headwinds in the region from rising inflation and supply disruptions to industry and we think that recoveries will slow sharply in Q4.

22 October 2021

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CBR accelerates its tightening cycle again

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Gulf and oil prices, Egypt remittances, PIF’s Call of Duty

The latest drop back in oil prices is unlikely to be of much concern to policymakers in the Gulf and we still think that there is a window of opportunity for fiscal policy to be loosened. Elsewhere, remittances into Egypt have held up well during the pandemic but this is unlikely to be enough to prevent falls in the pound. Finally, Saudi Arabia’s Public Investment Fund (PIF) raised its stake in a major US video game producer this week although foreign acquisitions may become rarer as the PIF heeds the call to support domestic projects.

19 August 2021

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A dive into Saudi Arabia’s balance of payments

A rise in oil prices has supported an improvement in Saudi Arabia’s current account position, which should be in surplus over the coming years. That, combined with signs that the sovereign wealth fund is slowing its international investments, will help to limit any further decline in the Kingdom’s foreign exchange reserves. The result is that the dollar peg is unlikely to come under pressure any time soon.

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Erdogan disappointed as CBRT stands pat

Turkey’s central bank (CBRT) left interest rates on hold at 19.00% today and, with inflation likely to remain elevated over the coming months and the economy having bounced back quickly from May’s lockdown, an easing cycle is unlikely to commence until the tail end of 2021.

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