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Too quick to become optimistic on Ukraine? Ukraine’s President Volodymr Zelensky has hit the ground running in his bid to push key reforms through the Rada. Markets have taken these developments, as well as the strong Q2 GDP figures, positively but we …
6th September 2019
Falling inflation to keep monetary easing cycle going The fall in Russian inflation to a weaker-than-expected 4.3% y/y last month strengthens our view that the central bank will lower its policy rate by 25bp when it meets tomorrow. Soft underlying price …
5th September 2019
Inflation drop means another aggressive rate cut next week The steeper-than-expected fall in Turkish inflation in August leaves the door wide open for the central bank to cut interest rates aggressively again when the MPC meets next week. We have …
3rd September 2019
Surveys still consistent with industrial slowdown in Central Europe The batch of August PMIs released for Central Europe were a reassuring improvement following the plunge in July but remain consistent with a further slowdown in industrial output over the …
2nd September 2019
Economy rebounding strongly from recession The stronger-than-expected 1.2% q/q rise in Turkish GDP in Q2 has prompted us to revise up our 2019 GDP forecast to -0.8% (previously -1.8%). But there’s a growing risk that policymakers’ efforts to turbo-charge …
No-deal Brexit risks come back into play The increasing likelihood of a no-deal Brexit is coming at a time when Central Europe is starting to be affected by weakness in the euro-zone and a more general slowdown in the global economy. As a result, the …
30th August 2019
Growth remained solid in Q3 The European Commission’s batch of Economic Sentiment Indicators (ESIs) for August suggest that regional growth remained strong in Q3 at a little under 4% y/y. The ESIs rose in six of the ten Central and Eastern European (CEE) …
29th August 2019
Central Europe is one of the few parts of the world where central banks haven’t eased monetary policy recently. Indeed, we think that the focus is likely to remain on tightening, particularly in Poland and Hungary. Inflation is likely to remain above …
28th August 2019
Turkish central bank takes aim at bank lending The fall in the Turkish lira this week amid concerns about the central bank’s shift towards monetary easing strengthens our view that, while interest rates will be cut aggressively in the near term, the MPC …
23rd August 2019
Growth remained solid at start of Q3 The batch of Polish activity data for July suggest that strong domestic demand is offsetting weakness in export-led sectors. Our GDP Tracker suggests that growth edged just below 4% y/y at the start of Q3. July’s …
22nd August 2019
The recovery in Hungarian private sector credit has been an important driver of GDP growth in recent years, but we think that the credit boom doesn’t have much further to run . One of the most impressive aspects of Hungary’s recent expansion – GDP grew by …
21st August 2019
Economy hits a bump in the road July’s Russia activity data suggest that, after recovering slightly in Q2, the economy may have lost a bit of momentum at the start of Q3. This, combined with easing inflationary pressures, will leave the door open for more …
19th August 2019
Russia: slow and bumpy recovery ahead Russia’s economy staged a recovery in Q2, but the early evidence suggests that the economy failed to gather momentum at the start of Q3. The preliminary Q2 GDP figure released on Monday showed that the economy …
16th August 2019
Industry collapses, although surveys point to better Q3 The 3.7% m/m fall in Turkish industrial production in June adds to the evidence that GDP growth in Q2 was much weaker than in Q1. Leading indicators suggest that the scale of the fall in output was …
The rise in Polish inflation to a seven-year high in July and likelihood that it will stay above target over the next 18 months will keep the focus of the MPC on tightening. But we don’t think this will tip the balance and are sticking with our view that …
14th August 2019
Growth likely to slow from here The strength of the Q2 GDP data for Central and Eastern Europe suggests that domestic demand continued to offset the impact of euro-zone weakness. However, there are signs that soft external demand is set to take a bigger …
Early signs of a recovery The slightly better-than-expected 0.9% y/y rise in Russian GDP in Q2, up from 0.5% y/y in Q1, is likely to be followed by a further improvement in the second half of the year. But growth is still likely to be weaker than most …
12th August 2019
Industry’s outperformance coming to an end June’s terrible industrial production data for Central Europe provided the first clear sign that weakness in the euro-zone is dragging manufacturing activity in the region down. After rising strongly for most of …
9th August 2019
The recent pace of Russian household lending looks frothy, but the central bank already appears to have taken some of the steam out of the credit boom. Even if household loans start turning sour further down the line, the impact on the banking sector …
8th August 2019
Easing inflation strengthens the case for further rate cuts The decline in Russian inflation to 4.6% y/y last month – coming alongside the stability of the ruble this week – adds weight to our view that the central bank will cut its policy rate by a …
6th August 2019
The Turkish lira has held up remarkably well in the face of the escalation of the US-China trade war and the recent rise in global investor risk aversion. But with the threat of US sanctions lingering, concerns about Turkey’s external vulnerabilities …
Rise in inflation to be temporary, further large rate cuts still on the cards The rise in Turkish inflation in July is likely to be temporary and followed by chunky falls in the coming months. Accordingly, so long as the lira remains stable, the central …
5th August 2019
CBRT too sanguine on inflation risks The Turkish central bank’s optimistic inflation forecasts add weight to our view that it is likely to go too far with monetary easing and will ultimately have to reverse course further down the line. In its latest …
2nd August 2019
The communications following today’s meeting suggest that Czech policymakers are trying to temper the market’s view that interest rates will be cut in the coming months. Nonetheless, the Bank’s projections have moved closer to our view that rate cuts will …
1st August 2019
PMIs weaken further, hard data to follow suit soon July’s batch of manufacturing PMIs point to a sharp slowdown in industrial output across Central Europe at the start of Q3 . While the hard activity data have so far defied the weak messages painted by …
Holding up at the start of Q3 The European Commission’s Economic Sentiment Indicators for July suggest that growth across Central and Eastern Europe held steady at a decent 3.5% y/y or so at the start of Q3. Strength in consumer-facing sectors is, for …
30th July 2019
Turkish central bank playing with fire Turkish financial markets took Thursday’s larger-than-expected interest rate cut in their stride but we don’t think that this resilience will last. Investors seems to be coming round to our view that the central bank …
26th July 2019
The relatively dovish statement accompanying the Russian central bank’s decision to cut the policy rate today supports our view that the easing cycle has a lot further to go. We expect an additional 75bp of cuts over the next 9-12 months, whereas the …
A raft of survey data suggests that last month’s fall in Hungarian core inflation is unlikely to mark the start of a downward trend – as the central bank anticipates. We expect that underlying price pressures will build over the coming quarters, prompting …
The Turkish central bank’s new governor, Murat Uysal, delivered a sharp 425bp interest rate cut at today’s MPC meeting and pressure from President Erdogan means that further aggressive easing lies in store over the coming months. But this is likely to …
25th July 2019
Manufacturing surveys across Central Europe have overstated the weakness of industry recently, but the strength of production growth looks unsustainable. As prolonged weakness in the euro-zone takes an increasing toll on activity in the region, a slowdown …
24th July 2019
Russia ’s economy remained very soft in Q2, although it does at least seem to have dodged a technical recession – albeit by the skin of its teeth. Much of the weakness seems to be concentrated in the services sector, where slow household income growth and …
23rd July 2019
Erdogan: rates to be cut in a “serious manner” Comments this week from Turkey’s new central bank governor and President Erdogan suggest that an interest rate cut next Thursday will be followed by further aggressive easing in the coming months. The case …
19th July 2019
Growth loses momentum at the end of Q2 June’s weak batch of activity data came after two strong months and suggests that after growing by an impressive 4.7% y/y in Q1, the economy maintained a similar pace in Q2. The biggest disappointment was in the …
Economy continues to struggle in Q2 June’s activity data suggest that following a weak Q1, Russian GDP growth slowed in Q2. This, combined with soft inflationary pressures, supports our view that the central bank will cut rates next week. Russian monthly …
17th July 2019
An initial round of US sanctions on Turkey, if approved by President Trump, would probably generate some financial market turbulence and this could ultimately cause major strains on banks’ balance sheets. US officials have reportedly prepared a list of …
16th July 2019
A further sharp rise in EU structural fund inflows will support strong Polish fixed investment growth over the next couple of years. But that won’t be enough to prevent overall GDP growth from slowing. Since the start of 2018, fixed investment growth has …
Strong domestic demand means that Romania’s current account deficit, which is already among the largest of any major EM, is likely to widen further. This makes the leu increasingly vulnerable to a deterioration in investor sentiment and is likely to …
15th July 2019
Downside risks to Turkey’s outlook mount Developments in Turkey over the past week highlight that all levers of economic policy have effectively been centralised in the hands of one man – President Recep Tayyip Erdogan. The reaction in financial markets …
12th July 2019
Industry rebound suggests economy avoided contraction in Q2 The stronger-than-expected Turkish industrial production figures for May suggest that the economy may just have avoided a fresh fall in GDP in Q2. Nonetheless, we expect the economic recovery …
The Czech economy has underperformed its regional peers in recent years due to its larger exposure to the euro-zone and weaker household spending. However, the Czech slowdown is close to bottoming out. In contrast, slowdowns elsewhere in Central Europe …
10th July 2019
Overview – Regional GDP growth probably hit a trough in the first half of the year, but the recovery from here on will be sluggish. Turkey is only likely to pull out of its recent recession slowly, and growth in Russia will be held back by oil output …
9th July 2019
Further fall in inflation likely to prompt a rate cut this month The further fall in Russian inflation to 4.7% y/y last month, coming alongside recent dovish comments from the central bank, has prompted us to pencil in a 25bp rate cut (to 7.25%) at the …
8th July 2019
The dismissal of Turkey’s central bank governor over the weekend increases the chances of aggressive cuts in interest rates in the near-term. But it has also raised the risk of larger currency falls and is likely to make the country’s high inflation …
Oil sector drag won’t prevent Russian recovery The rollover of OPEC’s oil production quotas for nine more months will be an unhelpful headwind for Russia’s economy, but it is unlikely to prevent growth from picking up in the second half of 2019. Russian …
5th July 2019
The relatively dovish stance adopted by Poland’s MPC in the communications accompanying today’s interest rate meeting supports our view that monetary policy settings will be left unchanged until the end of the Council’s term in early-2022. The decision by …
3rd July 2019
Plunge in inflation brings rate cuts onto agenda, but all hinges on lira The sharp decline in Turkish inflation in June, to 15.7% y/y, increases the chances that the central bank will embark on an easing cycle at its policy meeting later this month. But …
A rise in inflation has led five of the ten Polish MPC members to suggest that interest rates may soon need to be raised. But we doubt that any of the five more dovish members, including Governor Glapinski (who has the deciding vote in the event of a …
2nd July 2019
Central Europe set for an industrial-sector slowdown June’s PMI data point to a marked slowdown in industrial output growth in Central Europe over the coming quarters. Elsewhere, Turkey’s latest PMI reading suggests that, following a disappointing Q2, …
1st July 2019
Turkey’s fiscal credibility under scrutiny Investors in Turkey will be nervously waiting to see if President Erdogan can persuade President Trump at the G20 to approve Turkey’s purchase of a Russian missile defence system, lifting the threat of sanctions …
28th June 2019
