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The direct economic impact of an initial round of US sanctions on Turkey related to the purchase of Russian defence equipment would probably be limited, but past experience suggests that the threat of further sanctions would weigh on the lira and cause …
27th June 2019
ESIs suggest CEE growth remained strong in Q2 June’s set of ESIs suggests that aggregate GDP growth in Central and Eastern Europe (CEE) remained at around 4% y/y in Q2. But over the coming quarters, problems in the euro-zone are likely to take a greater …
The Czech National Bank’s post-meeting communications offered the strongest hint yet that the monetary tightening cycle is over. With underlying inflationary pressures likely to ease and the global economy set to slow further, we think that easing will …
26th June 2019
Recent activity data suggest that recoveries in Emerging Europe’s two largest economies – Russia and Turkey – have been disappointing. In Russia, where the economy expanded by a meagre 0.5% y/y in Q1, growth hasn’t been much quicker in Q2. And after …
25th June 2019
We still think that further monetary tightening lies in store in Hungary over the next eighteen months. But dovish communications accompanying today’s monetary policy meeting, and the reluctance to hike interest rates in the face of rising inflation, …
The opposition candidate secured victory in the rerun of Istanbul’s mayoral election, but this is unlikely to result in a favourable shift in the direction of economic policymaking in Turkey as a whole. And major risks still lie ahead for the economy, …
24th June 2019
This weekend’s re-run of the Istanbul mayoral election will dominate the headlines in the coming days, but it looks like the result will do little to curtail the deterioration in Turkish economic policymaking. … Istanbul election won’t lead to turnaround …
21st June 2019
May’s activity data suggest that, following extremely weak GDP growth in Q1, Russia’s economy has failed to gather much momentum in Q2. … Russia Activity Data …
20th June 2019
Fiscal stimulus packages recently announced in Central and Eastern Europe won’t trouble public debt positions, but are coming at a late stage of economic cycles. As a result, they will cause macro imbalances to build and limit governments’ ammunition to …
18th June 2019
The weaker-than-expected Turkish industrial production data for April provide the first hard evidence that, after returning to growth in Q1, the economy contracted again in Q2. This supports our view that the recovery from recession will be slow and …
The Central Bank of Russia’s dovish communications accompanying today’s decision to cut the key rate support our view that more monetary loosening lies in store over the coming quarters. We expect that the one-week repo rate will be lowered to 6.75% by …
14th June 2019
Turkish assets look set to come under more pressure in the coming weeks as the government pushes ahead with its plans to purchase a Russian missile defence system. Meanwhile, comments from Russia’s Deputy Finance Minister this week, suggesting that …
Turkey’s banks came through last year’s currency crisis without suffering the severe problems that many had feared. But credit growth will probably stay weak, holding back the economic recovery. Moreover, banks’ reduced level of liquid FX assets, growing …
13th June 2019
The Turkish central bank provided further hints at today’s meeting that it is moving towards monetary easing. But policy moves will hinge on the lira and, with a number of flashpoints on the horizon, we think that the scope for rate cuts is limited. … …
12th June 2019
Polish industry has been surprisingly resilient this year, largely reflecting impressive demand from the domestic market. We still expect weak external demand to weigh more heavily on growth in the export-intensive manufacturing sectors this year, but …
11th June 2019
The rise in Russian inflation in late-2018 and early-2019 was driven largely by higher food prices and a VAT hike. To overcome these distortions, we’ve created a measure of ‘underlying’ inflation, which is currently in line with the central bank’s 4% …
10th June 2019
Protests in the Czech Republic this week calling for the resignation of Prime Minister Andrej Babiš have raised the chance of a government collapse. But even if political uncertainty builds, there is unlikely to be much impact on financial markets or the …
7th June 2019
The further fall in Russian inflation to 5.1% y/y last month probably seals the deal on an interest rate cut at next week’s meeting. We expect a 25bp cut to 7.50%. … Russia CPI …
6th June 2019
Weak export growth has caused Hungary’s current account balance to swing from a large surplus in 2016 to a small deficit, which is set to widen further. One consequence is that the forint is likely to depreciate against the euro over the next few years. … …
4th June 2019
May’s manufacturing PMI data supports our view that growth in Central Europe will slow over the rest of this year. The recent tightening of financial conditions in Turkey appears to be weighing more heavily on activity, reinforcing our view that the …
3rd June 2019
The weaker-than-expected Turkish inflation figures for May, combined with the recent rally in the lira, means that the MPC will continue to shift away from its hawkish stance at this month’s policy meeting. But with a number of flashpoints on the horizon …
The fiscal stimulus package unveiled in Hungary this week adds to reasons to think that the economy will grow more quickly than most anticipate over the course of this year. Meanwhile, positive meetings with the IMF have increased Ukraine’s chances of …
31st May 2019
The full breakdown of Q1 GDP data for the economies of Central Europe confirmed that domestic demand remains the main driver of growth, although there was a surprisingly large boost from net trade in a few economies. But a fading of the investment boom …
Turkey’s economy returned to growth in Q1 but the tightening of financial conditions over the past couple of months has probably resulted in a renewed downturn. This reinforces our view that the recovery will be slow and bumpy and we remain comfortable …
A recent improvement in the survey data from Russia suggests that, following an extremely disappointing Q1, the economy should undergo a modest recovery over the next few quarters. … Russian survey data point to small pick-up in …
30th May 2019
Emerging Europe has been one of the few parts of the emerging world where attention has centred on monetary tightening (rather than loosening) in the past month. A rise in core inflation to multi-year highs has prompted talk of rate hikes in Poland, …
29th May 2019
May’s set of ESIs suggests that aggregate GDP growth in Central and Eastern Europe slowed to 3.5% y/y in Q2 following impressively strong growth of 4.3% y/y in Q1. … Economic Sentiment Indicators …
28th May 2019
April’s activity data suggest that Russian GDP growth picked up at the start of Q2 as strong industrialoutput offset continued weakness in the retail and construction sectors. … Russia Activity Data …
24th May 2019
Steps taken this week by Turkish officials to shore up the lira could be the first move towards the imposition of capital controls, but if anything these are likely to store up larger falls in the currency. Elsewhere, comments this week from the Russian …
April’s strong batch of activity data suggests that, following an already-impressive Q1, Poland’s economy accelerated at the start of Q2. Our GDP Tracker points to growth of 5.3% y/y in April. … Poland Activity Data …
23rd May 2019
Fiscal policy exerted a big drag on the Russian economy last year and in Q1 of this year, but there are signs that the fiscal stance is now becoming less restrictive. This should support a modest recovery in GDP growth over the next few quarters. … …
22nd May 2019
The much weaker-than-anticipated Russian Q1 GDP growth figure of 0.5% y/y is consistent with a q/q contraction in output. We think that this probably marks the trough and growth should pick up over the next few quarters. Even so, the latest data are …
17th May 2019
An impressive batch of GDP data from Central and Eastern Europe, released this week, added to the evidence that strong domestic demand is offsetting external weakness. Elsewhere, Turkey’s budget deficit widened further in April, raising concerns that …
Another strong batch of GDP data for Central and Eastern Europe suggests that strong domestic demand continued to offset weak external demand in Q1. We expect that growth will remain robust over the coming quarters, but this will result in a continued …
15th May 2019
The much better-than-expected 2.1% rise in Turkish industrial production in March adds to signs that the economy grew in Q1, by around 0.5-0.8% q/q. But the recent tightening of financial conditions means that economy could contract again in Q2, …
14th May 2019
The Turkish central bank (CBRT) seems to have become more inclined to use its foreign exchange reserves to support the lira, despite growing scrutiny about the level of reserves. Growing question marks about reserve coverage are likely to damage the …
13th May 2019
The raft of Q1 GDP data due next week are likely to show that aggregate growth in Emerging Europe slowed to its weakest pace in over two years. Much of this reflects weakness in Russia; growth in Central Europe held up better thanks to the strength of …
10th May 2019
The recent pick-up in Hungarian core inflation is partly a result of tax changes but also reflects rapid wage growth, and this is likely to cause underlying price pressures to continue to build. We think that this will result in additional monetary …
9th May 2019
The small fall in Russian inflation to 5.2% y/y last month will provide reassurance to the central bank that inflation has now passed its peak. We expect the headline rate to ease further in the coming months and we think that policymakers will cut …
7th May 2019
The decision to cancel and re-run the Istanbul mayoral election is likely to prompt the Turkish government to continue loosening fiscal policy in the coming weeks. Past experience suggests that the stimulus won’t be withdrawn even after the election, …
The Turkish central bank’s messaging to investors has become even more confused over the past week and the institution’s damaged credibility means that it will be even more difficult for policymakers to make the case for interest rate cuts in the future. …
3rd May 2019
The weaker-than-expected Turkish inflation data for April will come as some relief to the central bank. But with a number of downside risks facing the lira, policymaker’s recent dovish shift feels premature and the scope for interest rate cuts this year …
The interest rate hike at today’s monetary policy meeting probably marks the end of the Czech National Bank’s tightening cycle. While we think that the currency will fail to appreciate by as much as the central bank anticipates, weakness in the euro-zone …
2nd May 2019
April’s PMI data point to a sharp slowdown in industrial output in Central Europe in the coming months. The weakness in the euro-zone looks set to take a heavier toll on Czech industrial output. Elsewhere, the recent tightening of financial conditions in …
Following several quarters of weakness, Russian wage growth will probably pick up a little over the coming months as public sector salaries are raised and labour market conditions continue to tighten. This should mean that GDP growth holds up better than …
1st May 2019
The National Bank of Romania’s decision to maintain strict control over money market liquidity marks a step in the right direction to addressing the large build-up of economic imbalances. But we think that these vulnerabilities will persist, prompting the …
The rise in Polish inflation to an 18-month high of 2.2% y/y in April was driven almost entirely by a pickup in food and fuel inflation. It appears that core inflation remained weak (at 1.5% y/y), which won’t be enough to prompt the dovish MPC to shift …
30th April 2019
Aggregate GDP growth in Emerging Europe appears to have slowed from 1.9% y/y in Q4 to around 1.3% y/y in Q1. While we don’t anticipate much of a rebound in the coming quarters, it does at least appear that the slowdown in regional growth is bottoming out. …
29th April 2019
April’s set of ESIs suggest that aggregate GDP growth in Central and Eastern Europe slowed from 4.0% y/y in Q1 to around 3.5% y/y at the start of Q2. It appears that the weak external environment is weighing more heavily on export-led industrial sectors …
The Turkish central bank’s dovish shift yesterday spooked investors and, with a number of flashpoints ahead for the lira, we think that it’s too soon for policymakers to be signalling interest rate cuts. Elsewhere, recent comments from several members of …
26th April 2019
