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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 …
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 …
