Filtered by Subscriptions: Emerging Europe Economics Use setting Emerging Europe Economics
The larger-than-expected 30bp interest rate hike by Hungary’s central bank (MNB) today was accompanied by hawkish comments that send a strong message about its intention to bring inflation back to its target. The tightening cycle is likely to be sharper …
27th July 2021
Delta variant unlikely to derail the recovery Concerns have grown over the past week about the spread of the Delta variant of COVID-19 but high vaccine coverage across much of the region has reduced the risk that policymakers will be forced to reimpose …
23rd July 2021
Russia’s central bank (CBR) opted for a larger 100bp interest rate hike, to 6.50%, at today’s meeting and the accompanying communications provided clear guidance that the tightening cycle is nearing an end. With inflation likely to rise further and …
A rise in virus cases in Israel has prompted the government to re-impose restrictions on activity, including mask mandates and vaccine certification for large events. There are signs that the Pfizer vaccine may be much less effective at preventing …
Overview – Rapid recoveries are underway across the region and GDP should return close to its pre-pandemic path sooner than in most other EM regions. While the spread of highly transmissible virus strains poses the greatest threat to the near-term …
21st July 2021
Economy loses a bit of momentum in June Polish industrial production and retail sales figures for June suggest that the rebound in economic activity softened a touch at the end of Q2, but GDP still looks to have expanded by 2.0% q/q in Q2. We think the …
Russian inflation shows no sign of letting up and looks set to remain above the central bank’s 4% target until at least the end of next year. With households’ inflation expectations also rising, we think the central bank will feel the need to step up the …
19th July 2021
Israel’s virus wave could be a warning for others The experience of Israel in recent weeks serves as a reminder that vaccine campaigns across Emerging Europe still have some way to go and that we are likely to have to learn to live with COVID long term. …
16th July 2021
Still few signs of widespread pressures building The rise in headline inflation in Israel to a near 8-year high of 1.7% y/y in June was largely a result of base effects that pushed up food inflation. The muted 0.1% m/m rise in prices suggests that …
15th July 2021
Industry holds up well but retail suffers during three-week lockdown Turkey’s activity figures for May, the month of a three-week national lockdown, showed that the industrial sector came through unscathed but that retail sales were hit hard. More timely …
13th July 2021
MNB to stay hawkish for now The surprisingly large rise in Hungarian inflation to 5.3% y/y in June – its highest rate in almost nine years – suggests that the risks to our interest rate forecast are skewed to the upside. The central bank (MNB) took a …
9th July 2021
Poland’s central bank left interest rates on hold today and, while it revised up its GDP growth and inflation forecasts, there was little sign in the accompanying press statement that the balance on the MPC has shifted further away from the ultra-dovish …
8th July 2021
Inflation rise will spook CBR The further rise in Russian inflation to a stronger-than-expected 6.5% y/y in June means the central bank (CBR) is likely to up the pace of tightening when it meets in a couple of weeks. A 75bp hike (to 6.25%) seems most …
7th July 2021
Turkish inflation hit a two-year high in June and recent domestic energy price hikes will cause it to rise even further over the next couple of months. High inflation and signs of a quick recovery from May’s lockdown mean that the central bank will …
Israel’s strong economic recovery prompted the central bank to phase out one of its emergency support programmes at today’s meeting and Governor Yaron’s comments suggest that the next step towards policy normalisation may involve the end of the bond …
5th July 2021
Inflation picks up, start of easing cycle likely to be delayed The fresh rise in Turkey’s headline inflation rate to 17.5% y/y in June, coupled with signs of a strong rebound in activity after May’s three-week lockdown, means that an interest rate cut in …
CBRT unlikely to win the war with dollarisation Turkey’s central bank (CBRT) took steps this week to tackle deposit dollarisation in the banking sector, but these efforts will fail to make headway in the absence of a stronger commitment to rein in high …
2nd July 2021
The Russian ruble appreciated to a one-year high against the dollar recently but we think the rally will fade as oil prices fall back and US Treasury yields rise further. That said, the central bank’s determination to rein in inflation should keep Russian …
Another strong batch of activity data for May suggest that Russia’s economy may have returned to just shy of its pre-pandemic level in Q2. The foundations are in place for the recovery to continue in Q3, but the latest virus wave and the possibility of a …
1st July 2021
Price pressures continue to mount The PMIs for June suggest that manufacturing sectors strengthened in Turkey, Czechia and Poland but weakened in Russia. Meanwhile, in Czechia and Poland, supply chain disruptions intensified, and there was further …
Strong recovery continues, price pressures building The EC’s Economic Sentiment Indicators showed a further rise in regional sentiment in June, driven by improvements in retail and services sectors. That said, there is also continued evidence of growing …
29th June 2021
Virus clouds lift over Turkey’s outlook The sharp improvement in Turkey’s virus situation has brightened the near-term outlook and presents a risk to our view that the central bank will start an aggressive easing cycle in the coming months. The number of …
25th June 2021
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
