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Russia: boost from fiscal policy seems optimistic Signs that Russia’s government is ramping up spending have raised hopes that economic growth will strengthen further in the coming quarters. But we don’t think that it will provide the large boost that …
22nd November 2019
Economy growing at a solid pace The batch of Russian activity data for October suggest that the economy started Q4 on a firm footing following Q3’s stronger-than-expected 1.7% y/y expansion. But with inflation likely to fall further, this is unlikely to …
20th November 2019
Turkey current account set to deteriorate Turkey’s current account has been in surplus for three consecutive months now, but the government’s efforts to speed up the recovery will probably cause the external position to deteriorate again soon. The surplus …
15th November 2019
Mixed performance across the region The Q3 GDP data for Central & Eastern Europe showed that while regional GDP growth slowed to its weakest pace in over three years, growth remained strong in Hungary and Poland. But with euro-zone weakness likely to take …
14th November 2019
Industrial recovery to gather pace The rebound in Turkish industrial production in September suggests that the economy ended Q3 on a firmer footing and more timely evidence points to a further recovery in the coming months. The economy as a whole is …
Recovery gains momentum The pick-up in Russian GDP growth to 1.7% y/y in Q3 appears to have been driven by a turnaround in the agricultural and wholesale trade sectors. But even though growth has strengthened, falling inflation means the central bank’s …
13th November 2019
The recent pick-up in bank lending in Turkey probably has further to run over the coming months, which will provide some support to the economic recovery. But the pace and composition of new lending indicates that vulnerabilities in the banking sector and …
12th November 2019
GDP figures this week are likely to show that Central and Eastern Europe recorded another strong quarter of growth in Q3, despite ongoing weakness in the euro-zone. But more timely data suggest that this strength won’t last, supporting our view that …
11th November 2019
Mixed performance across the region The batch of Q3 GDP data to be released next week are likely to show that Russia’s economy continued to struggle while Central and Eastern Europe held up well, particularly given the context of sluggish growth in the …
8th November 2019
The statement following today’s MPC meeting confirmed that the Czech central bank is still concerned about above-target inflation and the need to hike interest rates. But with the economy likely to slow sharply next year and inflationary pressures to …
7th November 2019
The National Bank of Poland (NBP) left interest rates on hold at 1.50% today and with external headwinds mounting and the economy likely to slow sharply over the coming quarters, calls for interest rate cuts are likely to grow. But we think that …
6th November 2019
Below-target inflation to keep easing cycle going The decline in Russian inflation to 3.8% y/y in October is likely to be followed by further falls in the coming months, providing scope for the central bank’s easing cycle to run a little further. We …
Further drop in inflation, easing cycle isn’t over just yet The drop in Turkish inflation last month probably marks the trough and inflation is likely to rise over the coming months. Pressure from President Erdogan and recent sanguine inflation forecasts …
4th November 2019
Nord Stream 2 gets the go ahead The Danish government’s decision to approve the Nord Stream 2 gas pipeline this week is widely seen as a victory for Russia. The project may be completed in the coming months, allowing Russia to ship gas directly to Europe …
1st November 2019
Russia & Czech weak, but Turkey likely to improve The weak Russian and Czech manufacturing PMIs for October provide reason to expect the country’s industrial sectors to continue to struggle. Meanwhile, even though the Turkish PMI fell last month, it is …
Turkey’s economy has made a strong recovery from its recession last year, but investment has continued to fall and is unlikely to make a quick turnaround over the next couple of years. GDP rose by 1.6% q/q in Q1 and 1.2% q/q in Q2 (see Chart 1), supported …
31st October 2019
Early signs of a Q4 slowdown The European Commission’s Economic Sentiment Indicators (ESIs) for October provided firmer evidence that weakness in manufacturing sectors in Central and Eastern Europe is now spreading to consumer-focused sectors. Overall, …
30th October 2019
Large interest rate cuts and dovish comments from central banks in Russia and Turkey this month drove rallies in both countries’ local currency bond markets. The yields on sovereign 10-year local currency debt have dropped by 60bp since the start of this …
29th October 2019
Rate cuts & dovish noises The raft of interest rate cuts and dovish noises out of central banks this week suggest that monetary policy is likely to remain loose or be loosened further across most of the region over the coming quarters. That said, we think …
25th October 2019
The Russian central bank’s decision to opt for a 50bp rate cut today (to 6.50%) and the dovish tone of the accompanying statement support our view that the easing cycle has further to run. As things stand, we expect the one-week repo rate to be lowered to …
September’s plunge in inflation alongside the removal of US sanctions gave the Turkish central bank the green light to deliver another larger-than-expected interest rate cut today and the easing cycle has a little further to run in the coming months. But …
24th October 2019
The weakness in Russian retail sales looks close to bottoming out, but any turnaround will be modest. This is one reason to think that the overall recovery in GDP growth will be weak and that the central bank’s easing cycle is likely to be deeper than …
23rd October 2019
Slowdown continues in Q3 The batch of Polish activity data for September suggest that GDP growth slowed from 4.5% y/y in Q2 to 3.8-4.0% y/y in Q3. There was a marked improvement in the industrial sector last month . Industrial production rose by 5.6% y/y …
21st October 2019
The five-day ceasefire in Syria agreed by Turkey and the US yesterday has prompted a rally in Turkish markets, but the calm could prove temporary and the charges brought against Halkbank this week underline the vulnerability of the banking sector. In …
18th October 2019
Economy struggling for momentum The soft Russian activity data for September suggest that GDP growth over Q3 as a whole was in line with Q2’s sluggish outturn of 0.9% y/y. Coming alongside low inflation, another 25bp interest rate cut at next week’s …
17th October 2019
Overview – Looser policy will support stronger economic growth in Russia, as well as in Turkey (so long as US sanctions don’t get much worse), in the coming quarters. In contrast, the economies of Central and Eastern Europe are likely to slow further as …
16th October 2019
Turkey’s financial markets have taken the US sanctions imposed yesterday in their stride, but the threat of harsher measures in the context of the country’s weak external position could result in a fresh sell-off in the coming days. This would act as a …
15th October 2019
The growing threat of sanctions on Turkey in relation to its recent incursion into Syria have already put significant downward pressure on Turkish financial assets and fragilities in the banking sector could precipitate even more severe problems. …
14th October 2019
The Polish Law and Justice Party’s second term in power is likely to be much less impressive than its first, marked by slower economic growth, higher inflation and a poor financial market performance. Law and Justice went into Sunday’s election with a …
Industrial weakness likely to be prove fleeting The larger-than-expected fall in Turkish industrial production in August is likely to prove a bump in the road, with more timely survey evidence pointing to a recovery over the coming months. That said, the …
Turkish markets to suffer as risk of sanctions grows The threat of sanctions against Turkey is growing and, given the context of the country’s large external debts, the fallout for local financial markets could prove to be more severe than that the …
11th October 2019
The prospect of Turkish military action in Syria has again raised the spectre of US sanctions. While these would probably be on the soft end of the spectrum, Turkey’s poor external position means that the mere threat of more action would weigh on the lira …
8th October 2019
Easing cycle has further to run The fall in Russian inflation to the central bank’s target of 4.0% y/y in September is likely to be followed by a further decline in the headline rate over the coming months. We currently expect an additional 50bp of cuts …
4th October 2019
Poland: Swiss-franc loans put banks in the spotlight The ruling by the European Court of Justice (ECJ) that Polish households can potentially convert their Swiss franc mortgages into zloty could result in bank losses but should not have a major macro …
Inflation returns to single digits, more rate cuts lie in store Last month’s steep fall in Turkish inflation, taking it back into single digits, was flattered by base effects and the headline rate will rise again later this year. Even so, these figures …
3rd October 2019
Turkish recovery gathers momentum, CEE remains weak Turkey’s PMI for September provides further evidence that the economy recovered strongly in the third quarter and with policy set to be loosened further, the recovery has some legs. Meanwhile, our …
1st October 2019
Three central banks surprised the markets this week with more hawkish-than-expected communications. The Turkish central bank is likely to cut rates further, but above-target inflation will prevent monetary easing in Hungary and the Czech Republic. …
27th September 2019
Growth holding steady in Q3 The European Commission’s batch of Economic Sentiment Indicators (ESIs) for September suggest that growth held steady at 4.0% y/y in Q3. But with the industrial surveys deeply negative and signs that services sentiment is …
The economies of Central and Eastern Europe (CEE) shrugged off ongoing troubles in the euro-zone economy for most of 2019 but the latest data offer evidence that this now taking a bigger toll. Industrial production growth in Poland and the Czech Republic …
26th September 2019
The deterioration in the external environment and willingness of the Hungarian MPC to look through above-target inflation means that monetary conditions are unlikely to change over the next twelve months. That said, we think that the central bank will …
20th September 2019
Turkey’s banks back in the spotlight The Turkish banking regulator’s decision to force banks to reclassify TRY46bn of loans as non-performing will raise concerns about the health of banks’ loans books, but the major risks in the banking sector stem from …
Slowdown in growth starting to look more pronounced The relatively weak batch of Polish activity data for August suggest that euro-zone weakness is taking an increasing toll on the Polish economy. Our GDP Tracker points to growth slowing from 4.4% y/y in …
Economy struggling to gain momentum The batch of Russian activity data for August suggest that the economy maintained a steady, if not inspiring, pace of growth in Q3. With growth unlikely to pick up markedly over the rest of the year, this provides …
18th September 2019
Turkey’s central bank looks set to cut interest rates further over the coming months, but past experience suggests that the easing cycle will be short and that renewed lira weakness will eventually force policymakers to reverse course. We expect rate …
17th September 2019
Poland minimum wage set to rise sharply Sharp hikes in the minimum wage proposed by Poland’s ruling Law and Justice party (PiS) ahead of October’s elections have raised concern about the inflation outlook, but we think that some of the worst fears are …
13th September 2019
Industry rebounds, current account continues to improve The chunky 4.3% m/m rise in Turkish industrial production in July confirms that June’s dip in output was a blip. Meanwhile, the current account position has continued to improve. But efforts to …
The Turkish central bank delivered another larger-than-expected interest rate cut today and we now expect the one-week repo rate to reach a trough at 12.50% (previously 16.00%). But if we’re right in expecting inflation to start rising again and the lira …
12th September 2019
The more dovish-than-expected press conference following today’s MPC meeting confirmed that the Polish central bank is placing more weight on concerns about the weak external environment than domestic inflationary pressures. While we think that inflation …
11th September 2019
We doubt that Central and Eastern European (CEE) currencies will be able to regain any of the ground they have lost against the euro over the next year or so. The Hungarian forint is likely to be the worst performing currency in the region, while the …
9th September 2019
Russian central bank governor, Elvira Nabiullina, used the post-meeting press conference to hint at a possible further rate cut by year-end, supporting our view that the easing cycle has further to run. For our part, we think slow growth and weak …
6th September 2019
