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Rapid rebound, but next stage of recovery to be tougher Turkey’s economy recorded a strong 15.6% q/q rebound in Q3 from its collapse in Q2, but lingering weakness in the tourism sector as well as the recent tightening of both virus containment measures …
30th November 2020
CEE past the worst as virus outbreaks ease There are encouraging signs that virus outbreaks have passed the worst in Central & Eastern Europe. Poland, the Czech Republic, and Slovakia have all recorded a decline in new daily infections in recent weeks. …
27th November 2020
Virus restrictions deal a blow to sentiment The EC’s Economic Sentiment Indicators (ESIs) took a leg down in November and point to the recovery stalling in the middle of Q4. The fall in sentiment was broad-based across the region, though it was much …
The positive news on COVID-19 vaccines has provided a boost to the region’s economic outlook and this has underpinned a rally in local financial markets . The general improvement in risk appetite and the “rotation” back towards energy and financials has …
26th November 2020
Industry holding up as the recovery in retail goes into reverse October’s batch of Polish activity data showed a marked divergence in the performance of industry and retail that will probably grow in November as lockdown measures bite harder. The recent …
23rd November 2020
Recovery goes into reverse in October Russian activity data for October suggest that the recovery in activity stalled at the start of Q4. With virus restrictions tightening in many regions, the roll out of the vaccine pushed back, and fiscal support …
20th November 2020
Poland, Hungary & the EU: what’s at stake The decisions by Poland and Hungary this week to veto the EU budget and recovery fund brought to a head a conflict about the rule of law that has been brewing for some time. The EU’s concerns regarding Hungary and …
The decision by Turkey’s central bank to hike its one-week repo rate by 475bp, to 15.00%, and pledge to provide all funding through this facility appears to have done enough to convince investors that there really is a positive shift in policymaking …
19th November 2020
Hungary’s central bank left its key interest rates unchanged today but the recent appreciation of the forint and signs that disinflationary forces have picked up has given the central bank scope to reduce the interest rate on its one-week deposit back to …
17th November 2020
Vaccine presents a shot in the arm to the recovery With most of Emerging Europe struggling to contain virus outbreaks and with the number of deaths still on the rise, news of a potential vaccine breakthrough this week is hugely encouraging. While …
13th November 2020
An impressive rebound, but the strength will not last for long The Q3 GDP data for Central and Eastern Europe generally beat expectations and Poland’s economy recovered much faster than elsewhere in the region. But the recent tightening of virus …
Recovery strong in Q3, but next phase will be tougher Turkey’s industrial production and retail sales data for September add to the evidence the recovery was strong over Q3, although prolonged weakness in the tourism sector and the recent sharp tightening …
Sharp fall in output followed by a strong rebound The stronger-than-expected improvement in Russian GDP growth to -3.6% y/y in Q3 means that the economy has come through this crisis in better shape than many other EMs. But the recovery lost a lot of steam …
12th November 2020
The recent tightening of virus containment measures across the region will push back the economic recovery well into 2021 and means that policy support will need to be stepped up before, as seems likely, an effective vaccine is distributed next year. But …
President Erdogan’s latest comments suggest that the recent changes in Turkey’s economic management team may herald a shift back to orthodox policymaking. If these developments are backed up by a sharp interest rate hike at next week’s MPC meeting – we …
The sacking of Turkey’s central bank governor, as well as the (possible) departure of Finance Minister and President Erdogan’s son-in-law Berat Albayrak, has prompted a rally in local financial markets on expectations that breaks within the ruling AK …
9th November 2020
Sanctions risk not gone away for Russia and Turkey Joe Biden’s chances of securing the US presidency are rising and it looks like there will be a divided government in the Senate. The ruble has appreciated since the election, but the risk of tighter …
6th November 2020
Weaker ruble feeding into stronger price pressures Russian inflation jumped to 4.0% y/y in October as the weakness in the ruble continued to feed into stronger consumer prices. There’s now a greater chance that inflation peaks at a higher level than we …
Poland’s central bank left its policy rate on hold at 0.10% at today’s MPC meeting and opted to reinforce its commitment to its asset purchase programme rather than announce new unconventional measures. These asset purchases are likely to work in tandem …
The Czech National Bank (CNB) kept interest rates on hold at today’s MPC meeting and, despite its downbeat view on the economic outlook, gave no hint that monetary policy would be loosened further. We expect interest rates to remain on hold for some time …
5th November 2020
The Turkish lira has continued to fall sharply over the past couple of days and pressure is mounting on the central bank (CBRT) to deliver aggressive policy rate hikes at the MPC meeting later this month (if not before). But the political backdrop means …
3rd November 2020
Inflation begins steady rise, adding to pressure on CBRT Turkey’s headline inflation rate edged up to 11.9% y/y in October and is likely to rise further over the coming months. This, combined with the recent sharp falls in the lira, means that the central …
Strength in October to prove short-lived The PMIs for October were fairly strong across the region and suggest that industry continued to recover last month. However, they probably understated the impact of the latest virus restrictions in CEE and we …
2nd November 2020
Is Turkey set for an emergency rate hike? Last week’s interest rate decision by Turkey’s central bank has come back to bite hard, but talk of an emergency rate hike may be a little premature. Unsurprisingly, the decision to tweak the interest rate …
30th October 2020
A Biden presidency would probably result in a tougher US foreign policy stance against both Russia and Turkey, paving the way for a further deterioration in relations, an increased risk of tighter sanctions, and an acceleration in both countries’ recent …
Strong rebound, but a renewed downturn incoming The 6.2% q/q rebound in Czech GDP in Q3 was stronger than expected, but this predated the surge in virus infections and tightening of restrictions which we expect to cause a renewed contraction in Q4. This …
Sentiment takes a hit amid renewed virus surge The small fall in the EC’s Economic Sentiment Indicators for October is consistent with the region’s recovery stalling this month. But given that the data collection period for October predates the tightening …
29th October 2020
The coronavirus outbreak across the region has gone from bad to worse. The Czech Republic has one of the highest per capita infection rates in the world and the two-week national lockdown until November 3 rd has already hit activity in certain sectors. …
28th October 2020
The Turkish lira has fallen sharply in recent days amid concerns about the central bank’s decision making, rising geopolitical tensions, and the backdrop of a dire external position. The experience from previous sell-offs is that most of the fall in the …
So much for the optimism about Russia’s recovery… Russia’s economy lost a lot of steam at the end of Q3 as the recovery in consumer spending over the summer reversed. (See here .) The rebound was supported by social transfers from the government and the …
23rd October 2020
The decision by Russia’s central bank to leave its policy rate at 4.25% today suggests that inflationary concerns are preventing further easing for now. But the communications reinforce our view that interest rates are likely to be cut next year to 3.50%; …
Overview – Fresh virus outbreaks and tighter containment measures mean that the economies of Emerging Europe are likely to suffer a fresh downturn in Q4, but we still think that the region will bounce back more strongly from the crisis than many other …
22nd October 2020
Turkey’s central bank (CBRT) left its benchmark one-week repo rate unchanged at 10.25% today but adjusted its other policy rates to give it more scope to tighten monetary conditions via the ‘corridor’. Political pressure is clearly making the CBRT …
Strong Q3, but a renewed downturn lies ahead in Q4 September’s batch of Polish activity data confirmed that the economy rebounded strongly in Q3, with GDP growth likely to have increased from -8.2% y/y in Q2 to -2.5% y/y. But this strength came before the …
21st October 2020
A very disappointing end to the third quarter There were few positives in September’s batch of Russian activity data as the contraction in retail sales deepened and the recovery in the manufacturing sector stalled. The rise in virus cases and tightening …
20th October 2020
Headwinds facing Czech economy growing The Czech government this week announced stricter containment measures for the next three weeks in an effort to control the surge in COVID-19 cases which, on a per capita basis, is now the worst globally. Last week, …
16th October 2020
The coronavirus crisis has already dealt a heavy blow to the Ukrainian economy and the risks to the outlook are growing: recent challenges to the independence of the central bank and anti-corruption institutions threaten to undermine the IMF deal agreed …
14th October 2020
Strong recovery set to lose steam Turkey’s industrial production and retail sales data for August add to the evidence that the recovery has remained strong, although the figures appear to have been flattered by a shift in the timing of maintenance …
13th October 2020
The speed and scale of the rise in coronavirus infections across Emerging Europe has prompted a response from the authorities, but policymakers are likely to turn to much broader and tighter restrictions that affect more areas of economic activity. This …
12th October 2020
Activity data show recovery stalled in August… The latest batch of activity data for CEE disappointed in August. Growth in Czech retail sales failed to gain pace and sales slipped back into a year-on-year contraction in Hungary. The level of sales in …
9th October 2020
The conflict between Armenia and Azerbaijan in the disputed region of Nagorno-Karabakh has created yet another schism in Turkey’s relations with the US, the EU and Russia. It may only take a misstep in the conflict to trigger an escalation of geopolitical …
8th October 2020
Rising inflation to prompt pause in monetary easing Russian inflation edged up to 3.7% y/y in September and we think that it will rise a bit further over the coming months, which is likely to prompt the central bank to pause its easing cycle at its …
6th October 2020
The surge in coronavirus cases in Russia looks set to trigger tighter restrictions in the coming months. But we doubt that policymakers will re-introduce a full lockdown. After all, it would be politically infeasible to do so at the same time as they …
Inflation steady but set to rise, prompting more monetary tightening Turkey’s headline inflation rate was unchanged for a third consecutive month at 11.8% y/y in September but we expect it to rise over the coming months. And with the lira still under …
5th October 2020
Geopolitical risks grow for Turkey The conflict in Nagorno-Karabakh has opened up another schism between Turkey, the EU and Russia. An escalation in tensions could trigger sharp falls in the lira and push the central bank into more aggressive monetary …
2nd October 2020
A collapse in foreign firms’ reinvested earnings and a stronger recovery in goods exports than imports have caused Poland’s current account surplus to swell to record levels during the pandemic. While some of these factors are likely to fade, we think …
Pace of the manufacturing rebound slows in September The mixed batch of manufacturing PMIs across Emerging Europe for September suggest that the initial rebound in activity over the summer started to run out of steam at the end of Q3. The recovery is …
1st October 2020
Surge in virus cases yet to weigh on sentiment The further rise in the EC’s Economic Sentiment Indicators for September suggests that the recovery continued this month, albeit at a slower pace. However, we suspect that the recent rise in virus cases …
29th September 2020
Currency concerns prompt interest rate hikes Central banks in Hungary and Turkey unexpectedly raised interest rates this week amid mounting concern about currency falls and inflation. While we think that this will ultimately be reversed in Hungary, …
25th September 2020
The Turkish central bank’s (CBRT’s) decision to hike its policy rates by 200bp today is a response to the recent lira weakness, and should help to restore the Bank’s battered credibility. The move gives the CBRT more room to tighten monetary conditions …
24th September 2020
