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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 …
21st May 2021
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
Putin’s fiscal giveaways, but no hurrah President Putin’s state of the nation address this week outlined more social welfare measures to help households ahead of elections in September, but the implications for growth and inflation will be limited. …
23rd April 2021
Russia’s central bank (CBR) hiked its policy rate by 50bp, to 5.00%, at today’s meeting and the accompanying statement strengthened the central bank’s hawkish message about the need for additional tightening to bring inflation back to target. We think …
Israel has been the world leader in the vaccination race and the early evidence is that the rapid re-opening of the economy has driven a strong rebound in activity, particularly in services sectors. In this Focus , we launch our coverage of Israel and …
22nd April 2021
Polish economy resilient in face of third virus wave Polish industrial production and retail sales data for March were much stronger than expected in light of the third virus wave and recent tightening of containment measures across Europe. The big …
Retail and industry diverge, but signs of underlying strength Russian industrial production and retail sales figures showed a marked divergence in growth in March, but the big picture is that activity has picked up recently and that the economy held up …
20th April 2021
Virus peaking in CEE, but Turkey getting hit hard Third virus waves across much of Central and Eastern Europe (CEE) seem to have peaked and authorities have started to ease restrictions on activity. But the situation in Turkey has gone from bad to worse, …
16th April 2021
The decision by the US to impose sanctions on newly-issued Russian sovereign debt has caused a sell-off in the ruble and sovereign bonds today, but we think any further market fallout or the macroeconomic impact will be limited unless sanctions are …
15th April 2021
The decision by the Turkish central bank (CBRT) to leave its policy rate at 19.00% was accompanied by reassuring language that the MPC, under new governor Sahap Kavciouglu, aims to bring down inflation. But the language also suggests that they are looking …
The resilience of tax receipts and the improved outlook for oil and gas revenues should provide scope for Russia’s government to soften its grip on the public finances and ease policy over the next few years. We expect an additional 2.0% of GDP of …
13th April 2021
Economy losing steam, headwinds intensify Turkey’s activity figures for February suggest that the economy lost momentum in the first quarter of this year and the recent surge in COVID-19 cases, combined with the tightening of financial conditions, means …
Russia-Ukraine tensions flare up An escalation of military tensions along the Russia-Ukraine border poses a major threat to political stability in the region and could exacerbate some existing macro vulnerabilities in both countries. For context, …
9th April 2021
Turkey’s large external vulnerabilities mean that aggressive rate cuts by the central bank (CBRT) would run the risk of sharp and destabilising falls in the lira. A probable next step by policymakers would be a turn towards capital controls. But we doubt …
8th April 2021
Rise in inflation to prompt further rate hikes The further rise in Russia’s headline inflation rate last month, to 5.8% y/y, is likely to prompt the central bank to follow up March’s interest rate hike with further tightening. We have pencilled in two …
6th April 2021
Holding up through the second wave The improvement in Russian GDP growth to -1.8% y/y in Q4 was driven by a rebound in household consumption and investment and confirms that the economy held up well during the second virus wave. This is likely to continue …
1st April 2021
Polish zloty re-touches its post-GFC lows The Polish zloty touched its weakest level against the euro this week since 2009 but we don’t expect the currency to lose further ground from here. The zloty has been one of the worst performing EM currencies over …
Supply problems and price pressures continue to build The manufacturing PMIs showed that supply problems intensified in March, and this continued to push up price pressures. While supply disruption also artificially pushed up the headline PMIs, there are …
Past experience suggests that, with inflation near a peak and the economy slowing (alongside pressure from President Erdogan for lower interest rates), Turkey’s central bank will push ahead and ease monetary conditions in the coming months . Last week we …
31st March 2021
Sentiment increases in March, but unlikely to last The EC’s Economic Sentiment Indicators (ESIs) showed an improvement across most of Central and Eastern Europe in March, despite a surge in virus cases across the region. That said, sentiment in Czechia …
30th March 2021
Third waves, lockdowns and new GDP forecasts The rise in virus infections, extension of containment measures, growing headwinds to the auto sector and slow pace of vaccination means that we are revising down our GDP forecasts in Central Europe this year. …
26th March 2021
The upheaval at Turkey’s central bank means that we now expect a 200bp interest rate cut next month followed by further aggressive easing in the second half of 2021. But the result is that inflation will stay high and the lira will fall much further, to …
Emerging Europe has been at the heart of the shift in EM monetary policy over the past month, with central banks in Russia, Turkey and Ukraine raising interest rates in March. The triggers for tightening were largely home grown in nature, including a …
25th March 2021
The replacement at the helm of Turkey’s central bank is particularly worrying against a backdrop of a dire balance of payments position, large dependence on foreign capital inflows and the central bank’s severely depleted foreign exchange reserves. If …
23rd March 2021
Hungary’s central bank (MNB) left its key interest rates on hold today but the tone of the communications could not have been much more hawkish without raising interest rates. The MNB is defending its view that inflation will settle back to the 3% target …
The abrupt sacking of Turkey’s central bank (CBRT) governor on Friday has triggered sharp falls in the lira and a tightening of external financing conditions. The banking sector is a key source of vulnerability and arguably looks more exposed than it was …
22nd March 2021
The shock decision by Turkey’s President Erdogan to sack central bank governor Naci Agbal late on Friday is likely to trigger large falls in the lira when markets open on Monday. It looks like the central bank’s (CBRT’s) efforts to fight the country’s …
20th March 2021
Economy struggling to gain momentum Russian industrial production and retail sales figures for February are consistent with GDP falling by around 4.0% y/y at the start of the year. The economy is struggling to gain momentum and, with the vaccine rollout …
19th March 2021
US-Russia relations reach a new low Comments from US President Joe Biden this week threatening to take a tougher stance against Russia have raised the prospect of tighter US sanctions that could deal a significant blow to Russian markets. Mr. Biden’s …
Russia’s central bank (CBR) unexpectedly hiked its key policy rate by 25bp to 4.50% at today’s meeting in response to the recent surge in inflation and the accompanying communications sent a strong signal that it is prepared for an aggressive tightening …
