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CBRT to shrug off higher inflation and cut interest rates this month The stronger-than-expected rise in Turkish inflation in December means that this month’s interest rate decision will be a close call. For now, we think that the central bank will cave …
3rd January 2020
Surveys for Central Europe still point to weakness ahead December’s batch of manufacturing PMIs for Central Europe remain consistent with a further slowdown in industrial production growth over the coming months, although there are tentative signs that …
2nd January 2020
Weak lira to (eventually) force rate hikes in Turkey The Turkish lira has been one of the worst performing EM currencies this month and this probably sets the scene for next year. This is a key reason why we think that the central bank will ultimately …
20th December 2019
Policymakers in Russia and Turkey have loosened monetary policy more than elsewhere in the emerging world over the past few months, but we think that easing cycles are nearing an end. Communications from Russia’s central bank suggest that, after one more …
17th December 2019
Ukraine: hard work begins after securing IMF deal Ukraine is on the cusp of securing a new IMF bailout, but history suggests that the government will struggle to meet the Fund’s demands, which could put the recent rally in the bond market into reverse. On …
13th December 2019
The Russian central bank governor’s post-meeting press conference was characteristically cautious, supporting our view that following today’s 25bp interest rate cut, there will probably be just one more 25bp reduction (to 6.00%) in the current easing …
Industry stutters at start of Q4, likely to be a blip October’s industrial production figures suggest that Turkey’s economy made a soft start to Q4 but more timely evidence suggest that this will prove a blip. Looser monetary and fiscal policy is likely …
The 200bp interest rate cut (to 12.0%) by the Turkish central bank as well as other recent tweaks to boost lending suggest that policymakers will try to meet President Erdogan’s demand to bring rates down to single digits and bolster growth. As a result, …
12th December 2019
The recent strength of motor vehicle production across Central Europe will be increasingly difficult to sustain as weakness in the German economy persists. The Czech Republic’s vehicle sector is likely to struggle the most as a result, while Hungary’s …
There is a growing expectation that Russia’s government will adjust the way the National Welfare Fund invests next year. In this Update , we take a closer look at what this means and explain why, contrary to hopes in some quarters, it is unlikely to …
11th December 2019
Falling inflation keeps door open to easing The drop in Russian inflation to just 3.5% y/y in November increases the probability of another 50bp interest rate cut at the central bank’s meeting next Friday although, on balance, we think a 25bp rate cut is …
6th December 2019
Old habits in Turkey Data published this week provided familiar signs that growth in Turkey is increasingly unbalanced. The Q3 GDP figures published on Monday showing growth of 0.4% q/q caused some to highlight that the economy is slowing (growth in Q1 …
Inflation jump won’t prevent rate cuts, for now The rise in Turkish inflation in November is likely to mark the start of a steady upward trend over the next couple of years. This won’t prevent the central bank from cutting interest rates further at the …
3rd December 2019
Central Europe remains weak, Turkey continues to recover November’s batch of manufacturing PMIs for Central Europe showed a slight improvement on October’s figures but nonetheless remain consistent with a further slowdown in industrial output over the …
2nd December 2019
Economy continues to recover, strong growth likely in Q4 Turkey’s economy grew by a weaker-than-expected 0.4% q/q in Q3 but the lagged effects of policy loosening mean that the recovery is likely to gather pace over the next few quarters. The authorities’ …
Turkey: interventionist policy stores up problems Interventionalist policymaking in Turkey has come back on the radar this week. This is likely to lead to a misallocation of resources and adds to the reasons to think that the country’s next crisis could …
29th November 2019
Q3 GDP figures due next week are likely to show that Turkey’s economic recovery has continued and we think that year-on-year growth could reach as high as 5-6% in Q4 and early 2020. But policy loosening and rapid credit growth risk fuelling a fresh …
Headline inflation has eased across Central and Eastern Europe (CEE) over the past few months, but that was entirely due to falling food and fuel inflation; core price pressures have continued to build. Indeed, core inflation hit multi-year highs in …
28th November 2019
Growth remains strong in Q4 The European Commission’s batch of Economic Sentiment Indicators (ESIs) for November suggest that, after slowing to a three-year low of 3.6% y/y in Q3, regional GDP growth picked up to 4.0% y/y at the start of Q4. The ESIs rose …
The recent strong performance of Central and Eastern Europe (CEE) will probably continue for a few more years as fiscal and monetary policy remain loose. But this is likely to cause some of the pressures and imbalances that have started to build up during …
Economy losing further momentum Polish activity data for October showed that the economy lost a bit more momentum at the start of Q4. Our GDP Tracker points to growth slowing to around 3.6% y/y, from 3.9% y/y in Q3. Activity in the industrial sector …
25th November 2019
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 …
