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Industry resilient, but prolonged restrictions hit retail again Polish activity data for January suggest that the economy broadly stagnated at the start of the year as the extension of virus containment measures hit the retail sector while industry …
19th February 2021
Tepid recovery as industry weakens Russian activity data for January show that industry came off the boil at the start of the year while activity in the retail sector picked up strongly. The fall in virus cases and relaxation of some restrictions should …
18th February 2021
The pandemic hasn’t had a major disinflationary effect in Central Europe and the region is in what we think will turn out to be a prolonged period of above-target inflation. But how this affects monetary policy will differ across the region. Interest …
Turkey’s central bank left its policy rate unchanged at 17.00% at today’s MPC meeting and the hawkish tone in the statement, including a commitment to bring inflation back to the 5% target, supports our view that an easing cycle will arrive later and will …
The shift in policymaking at Turkey’s central bank (CBRT) has supported a rally in local financial markets over the past few months and we think this has further to run. We now expect the Turkish lira to end this year at 6.25/$ (previously 7.00/$). A …
17th February 2021
Q4 growth beats expectations but slow vaccine rollout clouds outlook The Q4 GDP data for Central and Eastern Europe revealed that all countries other than Poland grew at the end of 2020. But there was a marked divergence across the region that can be …
16th February 2021
Slow vaccine rollout may delay regional recovery The incredibly slow start to vaccination programmes across the region presents a growing downside risk to our forecast that the region will enjoy a strong economic recovery from Q2 . The latest data suggest …
12th February 2021
Russia’s central bank (CBR) left its key policy rate on hold at 4.25% today and the hawkish message about pro-inflationary risks means that there is no room for further easing. The CBR set the groundwork for a return of interest rates back to a neutral …
Smaller-than-expected contraction in Q4, Q1 should be better GDP figures show that Poland’s economy contracted by 0.7% q/q in Q4, which is likely to have been among the larger falls across Europe. Containment measures are likely to be lifted slowly in a …
Recovery falters at tail end of 2020 Turkey’s industrial production and retail sales figures for December add to the evidence that the economic recovery slowed sharply at the tail end of 2020. This weakness has almost certainly carried over into this year …
Rising inflation takes rate cuts off the table … for now The further rise in Russian inflation to a near two-year high of 5.2% y/y in January will remove any chance of an interest rate cut in the coming months. The central bank will wait for evidence that …
5th February 2021
Sputnik V late-stage trial results offer optimism Russia’s vaccination programme has got off to a slow start and there are a greater number of hurdles holding back rollout than we thought. But the good news this week regarding the high efficacy of the …
Stubbornly high inflation and concerns about a weaker exchange rate mean that Hungary’s central bank (MNB) will keep its powder dry in the next few months. But we think that inflation will ease over the first half of 2021, which should create scope for …
The waves of protests that have taken place across Russia in recent weeks pose the biggest challenge to President Putin in close to a decade and have put a risk premium on the ruble. The government is likely to loosen fiscal policy to boost its support, …
4th February 2021
Inflation rises again, but further tightening unlikely Turkey’s headline inflation rate rose again in January and may edge up a little further in the next few months, but we think that the central bank has probably done enough to convince investors that …
3rd February 2021
Stronger-than-expected performance in Q4 set to continue into 2021 The surprise 0.3% q/q growth in Czech GDP in Q4 was much better than expected as strength in industry more than offset weakness in services. This suggests that, despite being hit hard by a …
2nd February 2021
Modest decline in GDP, economy looks to have held up well in Q4 The full-year decline in Russian GDP of 3.1% in 2020 suggests that the economy expanded slightly in Q4 as the authorities opted for light-touch containment measures in response to the second …
1st February 2021
Industry resilient in Russia, Turkey and Poland The manufacturing PMIs for January were encouraging in Turkey and Russia and strong export performance continued to support Poland’s manufacturing sector. That said, there are further signs that prolonged …
Vaccine hold-up threatens to delay recovery The growing tensions between the EU and AstraZeneca over COVID-19 vaccines threaten to delay the economic recovery we had pencilled in for Emerging Europe during the first half of this year. AstraZeneca …
29th January 2021
Figures consistent with relatively modest contraction in Q4 The 2.8% decline in Polish GDP over 2020 was the worst performance since the collapse of communism and is consistent with the economy contracting by around 1.3% q/q in Q4. While prolonged …
Third virus waves weigh on sentiment across the region The EC’s Economic Sentiment Indicators were mixed across Central Europe in January but broadly point to a weak start to activity in Q1. The services sector in particular continued to struggle amid …
28th January 2021
Industry booming and retail rebounds as virus restrictions eased Polish activity data for December showed that industry continued to boom and the easing of virus restrictions supported a rebound in retail sales, with the result being that any contraction …
25th January 2021
Russian inward FDI hits post-Soviet low The slump in FDI inflows to Russia last year underline how bleak the country’s medium-term growth prospects are. Figures released by the central bank this week show that Russia attracted just $1.4bn in FDI last …
22nd January 2021
Russia and Poland have been regional outperformers in recent months due the relatively light-touch containment measures in the former and the strength of export-orientated sectors in the latter. But Turkey’s recovery has come off the boil and strict …
Turkey’s central bank left its benchmark one-week repo rate unchanged at 17.00% at today’s MPC meeting as concerns about the faltering economic recovery took priority. But the hawkish tone on inflation supports our view that rates will be unchanged …
21st January 2021
The rollout of COVID-19 vaccines has slowly picked up across the region and we think governments will ease most restrictions by the middle of this year. But there is a clear risk that vaccine rollout progresses more slowly and that the bar for easing …
20th January 2021
Hungary side-steps EU to ramp up vaccination Vaccination programmes gathered pace across the region this week, with Turkey administering doses of China’s Sinovac vaccine and Russian President Putin ordering the mass vaccination of the population. But …
15th January 2021
Overview – Prolonged containment measures mean that activity in Emerging Europe will remain depressed for longer than we had previously expected. But the region is well-placed to access and distribute vaccines, which should allow activity to recover more …
14th January 2021
Recovery still strong in mid-Q4, but will struggle to make more headway Turkey’s industrial production and retail sales figures for November indicate that the economic recovery remained strong in the middle of Q4. But more timely indicators suggest that a …
13th January 2021
The shift towards orthodox policymaking at Turkey’s central bank has supported a rally in the lira and, so long as the policy shift sticks (as seems increasingly likely) and the external environment remains supportive, we think that the currency’s …
12th January 2021
Vaccination programmes struggle to take-off COVID-19 vaccination programmes have started slowly in the region and, with virus restrictions likely to be extended, or tightened further, economies will remain weak for a few more months at least. Russia has …
8th January 2021
Sentiment rebounds as virus restrictions ease The EC’s Economic Sentiment Indicators rebounded strongly in Central Europe in December and suggest that the slump in GDP in Q4 was smaller than we feared. But large virus outbreaks through the winter and …
7th January 2021
The Polish central bank’s (NBP’s) concerns about the strength of the zloty are likely to prompt it to intervene more aggressively in the FX market and deliver a 10bp interest rate cut, to 0.00%, most likely in March. But there is a growing risk that the …
6th January 2021
Supply chain disruptions intensify as lockdown measures bite The manufacturing PMIs for December provided encouraging signs that output and new orders continued to rise strongly. However, the surveys also provide evidence that supply chain disruptions and …
4th January 2021
Inflation rises further, but further rate hikes seem unlikely The further rise in Turkey’s headline inflation rate, to 14.6% y/y in December, is unlikely to be enough to push the central bank (CBRT) towards additional monetary tightening. Even so, with …
Industry boosts activity in November Russian activity data for November suggest that, despite the sharp rise in new COVID-19 cases and tightening of virus restrictions, the economy may come through Q4 suffering only a minor slowdown. Data published this …
18th December 2020
Russian government takes aim at food price surge Moves by the Russian government this week to try to curb the rise in food inflation are unlikely to have a major impact on monetary policy, but they underline that the shift towards providing more social …
The central bank of Russia (CBR) left its key policy rate unchanged at 4.25% as expected today but the accompanying communications delivered a clear hawkish shift. With headline inflation likely to remain high into 2021, interest rates are set to stay on …
Daily new COVID-19 infections have levelled off or fallen in most parts of Central Europe and there are signs that activity has started to rebound. But the fresh rise in new cases this month in Slovakia and the Czech Republic underlines the challenges …
17th December 2020
2020 has been a year full of surprises and in this Update we outline key areas to watch next year. Early vaccine distribution will pave the way for a rapid economic recovery, but disinflation forces are likely to become stronger in Central Europe and …
15th December 2020
Recovery still strong at start of Q4, but headwinds mounting Turkey’s industrial production and retail sales data for October suggest that the economy carried a lot of momentum into the start of Q4 but the recent tightening of virus containment measures, …
14th December 2020
Sanctions threat a reminder of Turkey’s fragility Both the US and the EU look set to impose sanctions on Turkey, which could undermine the gains from the recent shift to orthodox economic policymaking. Any sanctions are likely to be towards the milder end …
11th December 2020
Parliamentary elections in Romania that took place on Sunday look set to result in the incumbent centre-right PNL party forming a new coalition government. A new PNL-led coalition would probably pursue a more conservative fiscal stance over the coming …
10th December 2020
The success of the Russian government’s preferential mortgage scheme this year has prompted concerns that a bubble might be forming in Russia’s housing market, but we think this risk is some way off. In fact, low interest rates and an expansion of the …
Failure of Poland and Hungary to reach an agreement with the EU over the veto of the bloc’s budget would have severe political and economic consequences if funds were withheld. Even if a deal is agreed, perhaps as soon as the EU Council meeting on 10-11 …
9th December 2020
Jump in inflation takes easing off the table … for now The jump in Russian inflation to a 16-month high of 4.4% y/y last month takes the prospect of further interest rate cuts off the table for the next few months at least. That said, with underlying …
4th December 2020
Will Poland and Hungary blink? Comments by the leaders of both Hungary and Poland today suggest that their governments are unwilling to back down over their EU budget vetoes. But threats by EU officials to circumvent Poland and Hungary could make them …
Inflation jumps, raising risk that CBRT is forced to hike rates again Turkey’s headline inflation rate jumped to a stronger-than-expected 14.0% y/y in November and, while the lira has rallied strongly over the past month and the economy looks set to …
3rd December 2020
The distribution of effective COVID-19 vaccines is likely to be relatively quick in Emerging Europe, paving the way for robust economic recoveries that will leave economies much closer to their pre-virus trend by end-2022 than most other EMs. Poland is …
1st December 2020
Easing of COVID-19 restrictions in CEE to support industry The manufacturing PMIs for November point to a slowdown in the region but, overall, the sector has held up much better than services. Encouraging signs that Central & Eastern Europe has brought …
