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Economy starts to recover Turkish activity data for May show that industrial production and retail sales recovered from their low point in April but it still looks like Turkey suffered one of the largest contractions in Q2 across major EMs. The economic …
13th July 2020
The rebound in retail sales and industrial production across Central and Eastern Europe in May supports our view that the region will experience a relatively strong recovery in the second half of this year. Data released this week provided further …
10th July 2020
Turkey’s credit boom that started towards the end of last year has been turbocharged in recent months and this should provide some welcome support to the economy as it emerges from the coronavirus crisis. That said, the nature of the lending reinforces …
9th July 2020
Rising inflation should not prevent further easing Russian inflation rose to 3.2% y/y in June and we think that it will rise a bit further over the coming months. But this increase should prove temporary and inflation is likely to remain below the central …
8th July 2020
Borders are slowly re-opening across Emerging Europe, but international tourists are unlikely to return to the region in significant numbers for the key summer season. Romania and Russia are the least vulnerable and efforts to promote domestic tourism …
7th July 2020
NBU governor departure raises IMF deal fears This week’s resignation of Ukraine’s central bank (NBU) governor is, by itself, unlikely to upend the country’s IMF deal but failure to replace him with a credible candidate or backsliding on recent key pieces …
3rd July 2020
Inflation jump reinforces idea that easing cycle is over The jump in Turkish inflation in June, to 12.6% y/y, as well as last week’s surprise decision by the central bank to leave interest rates unchanged, reinforces our view that the easing cycle is …
Poland’s central bank appears to have become concerned about the strength of the zloty recently and the negative impact this could have on the pace of the economic recovery, suggesting that it is likely do more to loosen policy this year. We think that …
2nd July 2020
Manufacturing sectors rebound strongly at the end of Q2 The rise in the manufacturing PMIs in June provide further signs that economic output recovered strongly at the end of Q2 as lockdown measures were lifted. While we would caution that the PMIs may …
1st July 2020
It is by no means inevitable that the coronavirus crisis puts a big permanent hole in the supply capacity of economies (i.e. their ability to produce goods and services). With the right government policies, many economies should be able more or less to …
29th June 2020
Sentiment picks up further in June The broad-based rise in June’s Economic Sentiment Indicators provide further signs that the economies of Central and Eastern Europe started to get back on their feet at the end of Q2. That said, the rebound in sentiment …
Putin seeks to consolidate power with referendum Russians began voting this week on amendments to the constitution which would give President Putin the opportunity to rule unfettered until 2036. The government has sweetened the deal with fiscal …
26th June 2020
Turkey’s central bank unexpectedly left interest rates on hold today and it’s difficult to see how economic conditions will change in such a way over the coming months to justify renewed easing. We now expect rates to be left on hold over the rest of this …
25th June 2020
Lockdown measures dealt a heavy blow to economies across the region in April, but the latest data offer encouraging signs that activity has recovered quickly over the past couple of months. Economic activity in the first few weeks of June was at or above …
23rd June 2020
Hungary’s central bank (MNB) unexpectedly cut its base rate from 0.90% to 0.75% at today’s monetary policy meeting, and we now think another cut is likely in the second half of this year. With the economic recovery likely to fall short of the central …
Activity bounces back strongly Polish activity data for May show that activity in the retail sector bounced back more quickly than in the industrial sector as lockdown measures were lifted. Even so, the figures support our relatively optimistic view that …
22nd June 2020
Poland’s central bank likely to consider other tools Comments from Poland’s central bank (NBP) this week highlighting the risk that a stronger zloty would hold back the economic recovery suggests that the NBP may pursue a more aggressive monetary stance. …
19th June 2020
Russia’s central bank (CBR) didn’t disappoint at today’s meeting, cutting the key policy rate by 100bp to a new post-Soviet low of 4.50%. With disinflationary forces proving stronger than expected and financial markets stabilising, the accompanying …
The effects of lockdowns have been felt unevenly across the region, with Romania and Turkey suffering among the largest falls in both retail sales and industrial production, while activity in Latvia and Ukraine has held up better. High-frequency data …
16th June 2020
Scarring effects will be uneven across the region All economies will suffer a permanent loss of output as a result of the pandemic, but recent labour market developments offer early signs that activity in Central Europe may recover more quickly than in …
12th June 2020
Activity falls off a cliff in April The plunge in Turkish industrial production and retail sales in April suggests that the economy suffered a almighty hit to GDP in Q2 – we expect the economy to suffer one of the largest contractions across major EMs of …
The early signs are that activity is recovering quickly in Poland as lockdown measures are lifted. Provided that the virus is contained, we think that Poland will experience the smallest contraction in GDP across Europe this year. Large policy stimulus …
9th June 2020
Easing inflation strengthens the case for further rate cuts Russian inflation eased to 3.0% y/y in May and the underlying picture is that inflation has been much weaker than many expected just a few months ago. Price pressures are likely to remain muted …
5th June 2020
Russia: a long-overdue fiscal package arrives Russia’s government unveiled a stimulus plan this week to speed up the economic recovery. The details are limited and the government is only belatedly getting its act together, but the response suggests that …
Turkey’s public finances remain in good shape compared with most other EMs but they have deteriorated in recent years and are no longer the pillar of strength that they once were. The debt-to-GDP ratio will continue to rise and, as investors demand a …
Higher inflation unlikely to preclude another rate cut The rise in Turkish inflation in May, to 11.4% y/y, suggests that the effects of the sharp fall in the lira in the early part of the month more than offset the impact of weaker domestic demand on …
3rd June 2020
Manufacturing sectors slowly recovering The manufacturing PMIs repeat the message from the ESIs released last week that activity in the region rebounded in May but remained at subdued levels. As lockdowns continue to be lifted and external demand …
1st June 2020
Nagy departure won’t affect MNB’s dovishness The resignation of one of the Hungarian central bank’s (MNB) key personnel may lead to a simplification of the monetary policy framework but is unlikely to alter the institution’s dovish bias. After 18 years …
29th May 2020
Growth in Q1 to be followed by collapse in Q2 Turkey’s economy managed to grow in Q1 as a strong January and February more than offset a dire March. But the latest activity figures are ominous and point to a collapse in activity in Q2. The 0.6% q/q rise …
Recovery slow going, for now May’s Economic Sentiment indicators suggest that the easing of lockdowns only provided a limited boost to the Central and Eastern Europe economies. The surveys are still consistent with a fall in GDP of around 6% y/y in Q2. …
28th May 2020
The coronavirus crisis has dealt a heavy blow to the economies of Emerging Europe over the past few months but the worst of the downturn now appears to have passed. As infection curves have flattened, most countries have eased lockdowns in recent weeks …
27th May 2020
Financial support for Turkey a sticking plaster Financing provided by Qatar and Japan has reduced the immediate threat of another currency crisis in Turkey, but ongoing efforts to defend the lira will ultimately lead to a sharp adjustment. Earlier this …
22nd May 2020
Output plummets at the start of Q2 The collapse in the Polish industrial production and retail sales data for April were partially offset by higher public spending on large infrastructure projects in the construction sector . This provides some …
Turkey’s central bank stepped up its monetary support for the economy with a 50bp cut in interest rates today and recent announcements of financial support from Qatar and Japan probably tips the balance in favour of further easing at June’s meeting. A …
21st May 2020
A deep dive into Russia’s banking system provides comfort that, while there are pockets of vulnerability beneath the surface, the economy is unlikely to experience a financial crisis like it did in 2008/09 and 2014/15. Even so, the post-coronavirus world …
20th May 2020
Economy sputters in Q1, collapse coming in Q2 The slowdown in Russian GDP growth to 1.6% y/y in Q1 almost certainly failed to capture the extent of virus containment measures as the government did not implement lockdown measures until late-March. The …
19th May 2020
Turkey’s balance of payments problems Strains in Turkey’s balance of payments persist and recent developments have done little to alter our view that the risk of another currency crisis is rising. Data this week showed that the current account posted a …
15th May 2020
Coronavirus devastates the region The batch of Q1 GDP data for Central & Eastern Europe shows that the region’s economies were in freefall at the end of March after lockdown measures were imposed. A strong start to the year meant that the data in Poland …
Economy in deep downturn The collapse in Turkish industrial production and retail sales in March add to the evidence that, even though the government refrained from imposing draconian lockdown measures, the economy probably contracted over Q1. More timely …
14th May 2020
The huge hit to Turkey’s balance of payments position from the coronavirus crisis and the evaporation of investors’ confidence in policymakers makes the risk of a currency crisis like that seen in 2018 increasingly likely. Worryingly, the banking system …
11th May 2020
The Czech central bank delivered a larger-than-expected interest rate cut at today’s MPC meeting but also disappointed those that had expected some unconventional measures to be announced to support the economy. Policymakers’ cautiousness and conservatism …
7th May 2020
President Putin faces one of his sternest tests The failure of the Russian authorities to contain the virus outbreak and the lack of urgency with which policymakers have stepped up fiscal support has made us increasingly concerned about a prolonged …
A worrying divergence is emerging in the policy response across the region. Policymakers in Central Europe imposed lockdown measures early which have succeeded in containing the outbreak. And the scale of economic policy support will bolster recoveries as …
5th May 2020
Activity grinding to a halt April’s manufacturing PMIs for Emerging Europe fell off a cliff and point to industrial production declining at a record pace in Q2. With lockdown measures being lifted in the Czech Republic, activity is likely to bounce back …
4th May 2020
Fall in inflation may tempt CBRT to cut rates, but lira risks abound The fall in Turkish inflation in April, coupled with growing evidence of a sharp economic downturn, may tempt the central bank to cut interest rates further. But this would severely test …
Turkey’s lira defence far from over Figures released this week highlighted the hit to Turkey’s balance of payments from steps to contain the coronavirus and, while the lira broke through 7/$ today, efforts to defend the currency are not over yet. Trade …
1st May 2020
There are encouraging signs that the authorities in Central Europe have brought the virus under control and policymakers are slowly starting to ease lockdown measures, which will support a recovery in activity. It's a different story in Russia where the …
29th April 2020
Activity falling off a cliff The collapse in April’s Economic Sentiment Indicators to levels not recorded before in Central and Eastern Europe point to GDP falling by around 6.0% y/y at the start of Q2, more than twice as large as the worst-affected …
Hungary’s central bank didn’t disappoint at today’s MPC meeting in announcing its bond purchase programme and it’s clear that policymakers have shifted their attention from keeping short-term rates low to pushing down long-term rates. But unlike bond …
28th April 2020
The coronavirus crisis is likely to cause unemployment rates to jump by 5%-points or so across most of the region in Q2 and we think the labour market fallout could be much worse in Turkey. However, most of the rise in unemployment should prove temporary …
