Filtered by Subscriptions: Emerging Europe Economics Use setting Emerging Europe Economics
The Czech National Bank (CNB) became the first major EM central bank to end its tightening cycle after it left its policy rate on hold at 7.00% today. The communications were not as dovish as we had expected, but the new-look MPC is clearly less inclined …
4th August 2022
Western sanctions have caused activity in certain sectors of Russia’s economy to collapse, but activity has held up reasonably well in key areas such as oil production and less import-dependent manufacturing. What’s clear, though, is that the full effect …
3rd August 2022
Inflation close to a peak, but will remain high The modest rise in Turkey’s headline inflation rate to 79.6% y/y in July suggests that inflation is nearing a peak, but it will remain close to these very high rates for several more months and will be slow …
PMIs point toward a contraction in industry Manufacturing PMIs for July fell to levels consistent with contractions in industrial production in Q3, with the exception of in Russia, where the downturn in manufacturing seems to have stabilised. There was an …
1st August 2022
Russian gas cut off raises energy supply risks The news flow this week continued to be dominated by concerns about energy supply this winter after Gazprom reduced gas exports to Europe further. The immediate consequence will be higher energy bills and an …
29th July 2022
Weakness in Q2, contraction likely in Q3 The 0.2% q/q expansion of Czech GDP in Q2 beat the consensus expectation for a small contraction, but it was roughly in line with what we had expected, and still marked a sharp slowdown in growth from Q1. We think …
The economic outlook has deteriorated across the region. Inflation is soaring and monetary conditions are tightening, which is weighing on households’ real incomes and spending power. The latest surveys show consumer confidence tanking and economic …
28th July 2022
Sentiment falls further, but price pressures show signs of easing The EC’s Economic Sentiment Indicators for Central and Eastern Europe showed declines across the region and across sectors in July, supporting our view that economies in the region are in …
Data pointing to a 9% contraction in Q2 The Russian industrial production figures for June were surprisingly strong, which likely reflects a pick-up in oil production. But retail sales remain depressed and show no sign of a turnaround. Our provisional …
27th July 2022
The decision by Gazprom to cut natural gas supplies to Europe to 20% of capacity has caused gas prices to surge and raised the risk of energy shortages during the winter. A full gas cut-off would result in self-inflicted pain for Russia. For the rest of …
Default and devaluation in Ukraine Policymakers in Ukraine devalued the hryvnia this week and asked creditors to suspend debt repayments, which will free up funds for the government, but will add to inflation and increase balance sheet problems elsewhere …
22nd July 2022
Romania’s current account deficit is likely to rise to almost 9% of GDP this year. While a weaker currency would help to reduce this shortfall, structural reforms are needed to boost competitiveness in the long term. Until then, Romania’s deteriorating …
21st July 2022
Economy now gripped in a slowdown The weak set of Polish industrial production and retail sales figures for June provide the strongest evidence yet that the economy is in the midst of a sharp slowdown. It is very likely that GDP contracted in q/q terms in …
Overview – Economies in Emerging Europe were resilient in the first half of this year, but the outlook has deteriorated markedly as headwinds have strengthened. Inflation is likely to continue rising and we think that GDP will do little more than stagnate …
20th July 2022
Energy rationing now a growing downside risk Governments ramped up efforts this week to prevent possible shortages of energy during the winter. But with the threat of lower Russian gas flows increasing, there is a growing risk of energy rationing that …
15th July 2022
Activity surpassing pre-currency crisis levels Turkey’s activity figures for May show that industrial production and retail sales have now both surpassed their highs from late-2021 despite the weight of sky-high inflation. With strong demand and high …
14th July 2022
The 200bp increase in the base rate (to 9.75%) by Hungary’s central bank (MNB) today has resulted in the most aggressive amount of monetary tightening in decades. With fiscal policy tightening too and the euro-zone on the verge of recession, all the signs …
12th July 2022
Inflation continues to drop back The further decline in Russia’s headline inflation rate to 15.9% y/y in June confirms that inflation has already passed its peak and we expect price pressures to ease further over the coming months. This is likely to …
8th July 2022
MNB pulls out all of the stops to support the forint Hungary’s economy is now under substantial pressure. The forint has slumped and interest rates have been hiked aggressively. The only way through this is to accept the pain of a weak currency and …
Surging global commodity prices have hit Central and Eastern European economies like a tsunami in recent months, causing a severe terms of trade shock and current account deficits to blow out. These deficits are likely to widen to 7% of GDP in Hungary and …
6th July 2022
The Bank of Israel (BoI) stepped up the pace of tightening today with a 50bp interest rate hike, to 1.25%, as it dropped its commitment to “gradual” interest rate hikes. This suggests that similar moves may be in the pipeline and supports our hawkish view …
4th July 2022
Threat from Turkey’s corporate FX debts grows Plans announced late last week by Turkey’s banking regulator add to the growing risks stemming from corporates’ large FX debt burdens. Late last Friday, the regulator announced that corporates will no longer …
1st July 2022
Further signs of manufacturing weakness Manufacturing PMIs for June showed further weakness across the region with the exception of Russia, which seems to have benefitted from a shift from imports toward domestic production. There were some encouraging …
Ukrainian refugees have boosted labour forces and consumer spending across Central and Eastern Europe (CEE) since the outbreak of the war, but this could prove short-lived if the conflict remains concentrated in Eastern Ukraine and more refugees return …
30th June 2022
Clearer signs that the economy has stabilised The latest Russian data for May suggest that activity, having declined sharply after Western sanctions were imposed in March, has started to stabilise. Some sectors of manufacturing have benefited from a shift …
29th June 2022
Inflation has continued to beat expectations across Emerging Europe over the past month, reaching rates not seen in decades in most countries. It is now weighing more heavily on consumer confidence, and the surprise inflation releases for May prompted …
Sharp fall in sentiment as recovery starts to slow The EC’s Economic Sentiment Indicators for Central and Eastern Europe showed broad-based declines in sentiment across the region and across sectors in June to levels not seen in a year. Economic activity …
The G7 proposal to impose a cap on the price of Russian oil and gas would introduce new supply-side risks by potentially disrupting Russian energy supplies. This could push global energy prices up further, but for now we still see Brent crude prices …
28th June 2022
Hungary’s central bank (MNB) stepped up the pace of tightening today with a much larger-than-expected 185bp increase in its base rate, to 7.75%, and the hawkish communications underline the view that further large rate hikes are likely to be delivered …
Russia’s government has now reportedly defaulted on its foreign-currency denominated debt for the first time since 1918, but this is a largely symbolic event that is unlikely to have an additional macroeconomic impact. Sanctions have already done the …
27th June 2022
Israel and Bulgaria heading for elections (again!) Governments in Israel and Bulgaria collapsed this week, although the threat to Bulgaria’s economy is probably greater as political instability puts EU fund inflows and the ability to secure gas supplies …
24th June 2022
High inflation, falls in the lira and aggressive monetary tightening elsewhere are clearly not enough to persuade Turkey’s central bank to lift interest rates, as it left its policy rate at 14.00% today. Disorderly falls in the lira are a major risk, …
23rd June 2022
Central and Eastern European economies are experiencing their worst bout of inflation since the late-1990s as surging food and energy prices have added to strong core price pressures across a broad range of goods and services. Monetary tightening cycles …
20th June 2022
Assessing the risks from a more hawkish US Fed The 75bp interest rate hike by the US Fed this week and expectations for further large hikes in the coming months have caused turmoil in global markets and will have ripple effects across Emerging Europe. We …
17th June 2022
The recent falls in the Turkish lira have led to increased speculation that, with the CBRT showing no sign of willingness to raise interest rates, policymakers will be forced to turn to capital controls to prevent sharp and disorderly moves in the …
16th June 2022
Israel’s labour market has tightened significantly in recent months and while there is so far little sign of a burst of wage pressure coming through, this is likely to be in the pipeline and feed through into stronger core inflation next year. Alongside a …
14th June 2022
Economy’s robust performance continues 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 …
13th June 2022
Turkey: anything but rate hikes The Turkish lira remained under pressure this week and officials unveiled on Thursday a raft of measures aimed at tackling inflation and bolstering the currency. The Treasury revealed that it will issue lira-denominated …
10th June 2022
The Russian central bank (CBR) delivered a 150bp interest rate cut to 9.50% today as its focus continued to shift away from inflation risks towards supporting the economy. We think further reductions are likely to be more gradual, with rates ending this …
Signs that inflation has already peaked The sharp fall in Russian inflation in May to 17.1% y/y suggests that inflation may have already peaked and price pressures are likely to ease further in the coming months. This will give the central bank room to …
8th June 2022
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. The lira slipped beyond 17/$ this morning …
Sanctions take their toll as activity falls sharply in April The April activity data for Russia released today show that the imposition of Western sanctions has caused a sharp fall in oil and gas production, a plunge in motor vehicles output and resulted …
1st June 2022
EU oil embargo not a disaster for Russia After weeks of intense negotiation, the EU eventually agreed to impose an embargo on seaborne imports of Russian crude and petroleum products that will likely result in a 90% fall in Russian oil exports to the EU …
Weak external demand and war in Ukraine take their toll Manufacturing PMIs for May showed that weaker external demand weighed on export orders in Emerging Europe, and that spillovers from the war in Ukraine hit output. There were some signs of improvement …
GDP across Central Europe expanded strongly in Q1 and the latest figures for March and April suggest that activity has remained resilient since the war in Ukraine started. Russia’s economy has not (yet) fallen off a cliff as had been expected. Industry in …
31st May 2022
Resilient Q1, but economy to struggle over rest of 2022 Turkey’s economy performed better than expected in Q1, with GDP rising by 1.2% q/q, as the boost to net trade from the lira’s collapse late last year more than offset the blow to household spending …
Sentiment a mixed bag in May The EC’s Economic Sentiment Indicators for Central and Eastern Europe were a mixed bag in May, but there were some encouraging signs that industrial sentiment has started to improve and that price pressures may be nearing a …
30th May 2022
Russia and default (yes, we’ve been here before!) A Russian sovereign default moved a step closer this week after the US government decided not to extend a waiver that allowed US investors to receive debt payments from Russia’s government. We looked at …
27th May 2022
Despite the backdrop of inflation at 70% and the lira falling by falling by 10% against the dollar this month, Turkey’s central bank left interest rates on hold at 14.00% today. So long as President Erdogan is in power, rate hikes will remain off the …
26th May 2022
Exports from Central and Eastern Europe (CEE) face growing headwinds, and this feeds into our below consensus view on economic growth in the region. The larger economies in CEE such as Poland and Hungary are particularly exposed to slower growth in the …
25th May 2022