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Economic activity across Emerging Europe is rebounding strongly now that virus waves have passed and restrictions have been lifted. High-frequency data show that mobility has surpassed its pre-pandemic level in most countries and vaccination programmes …
24th June 2021
The Czech National Bank (CNB) raised its two-week repo rate by 25bp to 0.50% at today’s meeting and the accompanying communications support our view that this marks the start of what will be the most aggressive tightening cycle in Europe. We expect that …
23rd June 2021
Hungary’s central bank (MNB) raised interest rates by 30bp today and with inflation set to remain above the MNB’s 4% upper tolerance level well into 2022, we expect an additional 60bp of tightening at the next three Inflation Report meetings. This would …
22nd June 2021
Economy roars back to life as restrictions lifted Polish retail sales rebounded strongly in May as restrictions were lifted, while industry continued to expand at a solid pace. GDP looks set to return to its pre-virus level in Q2 and we expect the …
While policymakers in Hungary and Czechia look set to lift interest rates from their pandemic lows later this week, we doubt that Poland’s central bank will follow suit this year. That said, with inflation in Poland set to be higher than we had previously …
21st June 2021
Surge in virus cases casts a dark cloud over Russia A surge in virus infections in Moscow and tightening of restrictions at a time when vaccine coverage is so low threatens to derail Russia’s economic recovery. New daily virus infections in Russia had …
18th June 2021
The statement accompanying today’s decision by the Turkish central bank (CBRT) to leave its policy rate at 19.00% suggests that policymakers are (for now) standing up to political pressure to lower interest rates. But we still think that an easing cycle …
17th June 2021
A further expansion of gas production is likely to boost Israel’s current account surplus by an additional 0.4% of GDP per annum by 2025. This will put upwards pressure on the real exchange rate, but Israel’s export composition means that this should not …
16th June 2021
Early signs of the re-opening pushing up core inflation The rise in inflation in Israel to 1.5% y/y in May was partly driven by food and energy, but there are some signs that underlying price pressures have increased. We think that inflation will rise …
15th June 2021
Russian household spending looks set to rebound strongly this year as “excess” savings are drawn down, credit continues to expand, government support boosts incomes, and the labour market recovers. This will keep inflation elevated for a while. But some …
Russian ruble gains as Biden-Putin summit nears The Russian ruble has appreciated markedly recently and the balance of forces now increasingly favours further gains. But a lot also depends on geopolitics; a positive outcome from the Biden-Putin summit …
11th June 2021
Russia’s central bank (CBR) raised its policy rate by another 50bp, to 5.50%, at today’s meeting and the accompanying communications delivered a much more hawkish tone about inflation risks and the need to raise interest rates further. With inflation set …
April figures point to fall in GDP in Q2 The m/m falls in Turkish industrial production and retail sales in April are likely to be followed by further weakness in May (when a three-week lockdown was in place). This supports our view that the economy will …
We now expect interest rates to rise across Central and Eastern Europe in the coming years and for all the major currencies to strengthen against the euro, with the Czech koruna and Polish zloty faring best. Until recently, currencies in Central and …
10th June 2021
While the composition of Central and Eastern European (CEE) exports is set to change over the coming quarters as some of the effects of the pandemic unwind, we forecast that export growth will remain strong, not least because of the solid economic …
The strength of Romania’s economy in Q1 and the positive outlook for growth over the coming quarters means that we now expect GDP to expand by 6.8% this year (compared to 4.8% previously) . The second estimate of Q1 GDP released today confirmed that …
8th June 2021
Sharp rise in inflation, 50bp rate hike now a real possibility on Friday The larger-than-expected rise in Russian inflation to 6.0% y/y in May was driven by broad-based increases in both food and non-food goods and we think that the balance of factors is …
7th June 2021
Retail sales pick up strongly as recovery takes hold Russian activity data for April were relatively strong and suggest that a sustained recovery is taking hold in Q2 thanks to an easing of virus restrictions on services sectors and continued rebound in …
4th June 2021
Erdogan wants rate cuts, but may have to wait Talk this week of rate cuts in Turkey has led to further falls in the lira and, ironically, means that the central bank (CBRT) will stand pat at this month’s meeting. But aggressive easing is still on the …
Inflation eases, but President Erdogan will have to wait for rate cuts The latest falls in the lira mean that, despite the fall in Turkey’s headline inflation rate to 16.6% y/y last month, the central bank (CBRT)will probably leave interest rates …
3rd June 2021
Price pressures in Central Europe are building from a broad range of sources and, while most of these are likely to be temporary, the issue is that countries were experiencing stubbornly high inflation before these pressures emerged. With output gaps set …
2nd June 2021
The breakdown of Q1 GDP data showed that strong domestic demand supported expansions in Hungary and Poland, despite severe virus waves, whereas another fall in household spending held back Czechia’s recovery. Growth will gather steam from Q2 onwards, but …
1st June 2021
Price pressures intensify further in Poland and Czechia The rise in the manufacturing PMIs to fresh record highs for Czechia and Poland in May was driven by output and new orders, but supply issues have continued to push up input and output prices. In …
Lira falls as mafia boss reveals all It’s been a rocky week for the Turkish lira amid more changes at the central bank and political upheaval; coming alongside high inflation, this has reduced the chances of a rate cut at June’s MPC meeting. At the time …
28th May 2021
Region recovering quickly, but price pressures rising The EC’s Economic Sentiment Indicators showed strong increases in most countries in May, largely driven by improvements in services sentiment as economies have started to re-open. This is likely to be …
The strength of inflation and expectations for a strong economic recovery have prompted a clear hawkish shift among Central European central banks. In Hungary, the MNB has set in motion the start of a tightening cycle in June and used its meeting this …
27th May 2021
Soft start to Q2, recovery to start from May onwards The m/m fall in industrial production and retail sales in Poland in April confirmed that the country’s third virus wave caused the economy to start the quarter on a soft note. But with new virus cases …
24th May 2021
MNB’s bombshell: a new era of monetary policy? Guidance from Hungary’s central bank (MNB) this week suggests that it is taking the fight against inflation much more seriously and that a monetary tightening cycle will start over the coming months. On …
21st May 2021
The announcement of a ceasefire between Israel and Hamas removes one of the key uncertainties about the outlook for Israel’s economy and we maintain our forecast for a rapid recovery in GDP to take hold from Q2 onwards, inflation to remain low and the …
Unexpected contraction in Q1, clouds form over the outlook The surprise 6.5% annualised contraction in Israeli GDP in Q1 largely reflected the impact of a vehicle tax hike on consumption and a sharp fall in government consumption. We expect GDP to rebound …
18th May 2021
Divergent performance in Q1, recovery to gather pace in Q2 The Q1 GDP data for Central and Eastern Europe revealed a divergence in performance between the regions’ economies amid third virus waves, with Hungary and Romania outperforming. With virus …
Economy recovers in Q1 as Russia avoids a third virus wave The improvement in Russian GDP growth to -1.0% y/y in Q1 was largely driven by a slight easing of containment measures as virus cases continued to fall during the winter. The vaccine rollout is …
17th May 2021
The “Polish Deal” outlined by the ruling Law and Justice party over the weekend strengthens the shift in policy since 2015 towards higher social welfare spending and support for families. Fiscal policy looks set to be looser over the next few years to the …
Turkey’s government has lifted a three-week national lockdown today and this should pave the way for a recovery over the coming months. But the hit to activity during the lockdown means that the economy is likely to record a contraction over Q2 as a …
Israel’s economy likely to weather Gaza conflict The experience of the conflict between Israel and Hamas in 2014 suggests that the economic impact of the current conflict may be limited and temporary. So long as it ends soon, we still expect a strong …
14th May 2021
Few signs of “reopening inflation”, policy to stay loose The latest inflation figures for Israel provided few signs that the reopening of the economy resulted in a pick-up in price pressures in April. This supports our view that inflation will remain in …
Recovery to gather steam in second half of the year Poland’s economy performed a little worse than most had expected in Q1 and the tightening of restrictions to curb a third wave of COVID-19 means that quarterly growth in Q2 is likely to be slower still. …
The sharp fall in virus cases and increase in the rate of vaccinations since March means that a sustained economic recovery in Central and Eastern Europe looks set to begin over the coming months. But, the latest decline in infections in Turkey is …
12th May 2021
Growth over Q1, but fresh contraction likely in Q2 Turkey’s activity figures for March suggest that the economy recorded further growth in Q1. But the recovery lost steam over the quarter and the combination of more restrictive virus containment measures …
11th May 2021
Inflation falls but underlying pressures remain strong The fall in Russian inflation to 5.5% y/y in April was largely driven by base effects that pulled down food inflation as underlying price pressures remained strong. The central bank will continue to …
7th May 2021
Poland’s ambitious national recovery plan Poland submitted its recovery and resilience plan to the European Commission this week and, while the plan to boost long-term growth looks ambitious, it should make a major contribution towards further income …
The Czech National Bank (CNB) left its two-week repo rate on hold at 0.25% today and backtracked on its recent dovish guidance about the timing of policy tightening. We expect a first 25bp interest rate hike in November, but the risks are becoming …
6th May 2021
The re-opening of Israel’s economy since March has driven a sharp tightening of labour market conditions and a growing share of firms are reporting labour shortages. This appears to be concentrated in the leisure and hospitality sectors where government …
Turkey’s central bank didn’t spring any surprises and left its one-week repo rate on hold at 19.00% today and, while the accompanying statement maintained a hawkish tone, policymakers left the door open for the start of an easing cycle over the coming …
Price pressures mount as supply problems bite April’s robust manufacturing PMIs for Czechia and Poland were artificially boosted by longer supplier delivery times and there were further signs that supply chain issues have caused price pressures to build. …
4th May 2021
Turkey enters lockdown The imposition of a three-week national lockdown in Turkey adds to the headwinds facing the recovery and means that the risks to our GDP growth forecast for this year are skewed to the downside. President Erdogan announced this week …
30th April 2021
Temporary setback before strong recovery The 0.3% q/q drop in Czech GDP in Q1 was slightly better than expected and, with authorities now moving to relax virus restrictions, we expect a strong recovery to take hold in the second half of this year. The …
Record-breaking rise in sentiment, strong recovery to soon take hold The EC’s Economic Sentiment Indicators (ESIs) recorded their largest ever monthly aggregate improvement across Central and Eastern Europe in April. Sentiment remains below its …
29th April 2021
Third virus waves held back recoveries in most countries in Q1, but the good news is that they appear to have peaked as new daily COVID-19 cases have fallen since mid-March. Russia has so far avoided a third wave and easing pressures on health systems …
28th April 2021
Overview – Third virus waves and the slow vaccine rollout will weigh on near-term growth in the region, but we expect a strong recovery in activity to take place later this year and in 2022. Our forecasts for growth are generally above the consensus and …
26th April 2021
