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The dovish nature of the Russian central bank’s post-meeting statement has prompted us to bring forward the interest rate cut that we had pencilled in for Q3 to June. Further ahead, we forecast that the benchmark one-week repo rate will be lowered from …
26th April 2019
The Turkish central bank’s decision to leave interest rates on hold at today’s meeting was widely expected, although changes to the accompanying statement suggest that the MPC is starting to consider easing policy. We think that the scope for interest …
25th April 2019
Regional GDP growth is set to slow to its weakest pace since 2015 this year and our forecasts for most countries are below consensus. Weakness in the euro-zone will weigh on the highly-open economies of Central Europe, while growth in Russia is likely to …
24th April 2019
The Russian ruble has been the best-performing EM currency so far this year, in spite of the threat of tighter US sanctions which caused a premium to open up in February. We think that the ruble rally will reverse over the coming quarters as oil prices …
Polish inflation is likely to rise over the coming quarters, but we don’t think that will prompt a policy response. With growth set to slow next year and the ECB likely to relaunch QE, we expect that the Polish MPC will keep interest rates unchanged right …
23rd April 2019
March’s stronger-than-expected activity data suggest that Poland’s economy has, so far at least, shrugged off weakness in Germany. We estimate that GDP growth came in at around 4.5% y/y in Q1 – only a touch weaker than in Q4. … Poland Activity Data …
March’s activity data suggest that Russian GDP growth slowed markedly at the start of this year, weakening from 2.8% y/y in Q4 to 1.0-1.5% y/y in Q1. The pace of expansion is likely to remain soft over the coming quarters, although the consensus view on …
18th April 2019
Plans outlined by Poland’s government this week confirmed that fiscal policy will be loosened significantly this year and that there will be more scope for stimulus in 2020 than we had previously envisaged. We still think, however, that policy will be …
The better-than-expected 1.3% m/m rise in Turkish industrial production in February provides further evidence that the economy pulled out of recession in Q1. But the recovery is likely to be slow. … Turkey Industrial Production …
16th April 2019
The Turkish finance minister’s economic reform plan unveiled this week was light on details and provided worrying signs that the government may lean on state banks to drive an economic recovery. Elsewhere, the rise in inflation across Central Europe in …
12th April 2019
The rise in Czech inflation to a six-year high of 3.0% y/y in March was driven primarily by a pick-up in food inflation and probably is not enough to convince the central bank to hike rates next month. … Czech CPI …
10th April 2019
The small rise in Russian inflation, to 5.3% y/y last month, should help to reassure the central bank that January’s VAT hike hasn’t translated into a marked strengthening of price pressures. Inflation has now probably peaked and should decline in the …
5th April 2019
The Turkish lira has been fairly steady following last Sunday’s local elections, but there are a number of potential flashpoints that could cause it to come under pressure again in the coming weeks. Elsewhere, strong February retail sales data from …
In the event of a no-deal Brexit, we think that weaker UK import demand would probably result in Central European GDP growth in 2019-20 being 0.3-0.5%-pts weaker than in a managed Brexit scenario. Meanwhile, the financial market fallout would probably be …
3rd April 2019
Turkish inflation was stable at 19.7% y/y in March and, while we expect it to resume its downward trend in the coming months, in the near-term at least monetary policy will remain tight to support the lira. … Turkey Consumer Prices …
The strength of Russian GDP growth in Q4 (and the upwards revisions to the historical data) has caused controversy. But overall, we think the new GDP figures probably bear a closer resemblance to actual economic conditions. More importantly, the pick-up …
1st April 2019
Another weak batch of PMI data from Central Europe points to a contraction in the region’s manufacturing sector over the coming months. More encouragingly, a rebound in Russia’s survey supports our view that the recent recovery in the country’s industrial …
Concerns about Turkey’s economy and financial markets are unlikely to fade even once Sunday’s local elections are out of the way. If anything, we think that they will intensify. Meanwhile, expected revisions to Russian GDP figures due next week are likely …
29th March 2019
Ukraine’s presidential election this Sunday is set to be a close race but, whoever ultimately wins, it looks like the recent shift away from orthodox policymaking will continue. Dollar bond spreads are likely to widen and the currency will weaken over the …
The Czech National Bank made clear that it is more concerned about the impact of weakness in the euro-zone than strong domestic inflationary pressures. We still think that above-target inflation may trigger more tightening this year, but we have revised …
28th March 2019
The turmoil in Turkey’s financial markets has raised external borrowing costs, making it more difficult to roll over the country’s large external debt burden. The risks are largest in the banking sector. … Turkey’s banks the weakest link during market …
March’s set of ESIs point to GDP growth in Central and Eastern Europe holding up at 4.0% y/y in Q1. But evidence that the weakening external environment is starting to take a bigger toll the region’s industrial sectors supports our view that GDP growth …
The Turkish lira has recovered lost ground, but financial conditions remain much tighter than they were at the start of last week and point to continued weakness in domestic demand. … Turkey: financial conditions tighten …
27th March 2019
Today’s very small interest rate hike in Hungary was the least that policymakers could do to show their commitment to the inflation target. But so long as key euro-zone export markets don’t weaken much further from here, today’s move is unlikely to be the …
26th March 2019
The sell-off in the Turkish lira late last week provided a timely reminder that many of the factors that drove last year’s currency crisis – including geopolitical tensions and concerns about the direction of domestic policymaking – have not disappeared. …
25th March 2019
The first batch of hard activity data for February out of Emerging Europe – published this week in Russia and Poland – were surprisingly strong, but it seems unlikely that this will be sustained as weakness in the euro-zone starts to take its toll. …
22nd March 2019
The Central Bank of Russia’s dovish tilt today has prompted us to bring forward some of the interest rate cuts that we had been anticipating in 2020. We now think that the policy rate will be lowered from its current rate of 7.75% to 7.25% by the end of …
Emerging Europe was one of the few parts of the world where inflation rose last month. In the Czech Republic, Hungary and Romania, this was driven by rapid wage growth which has pushed core inflation up to multi-year highs. As a result, despite the …
February’s activity data suggest that the Polish economy has, so far at least, shrugged off the recent weakness in Germany and continued to grow at a rapid pace in Q1. … Poland Activity Data …
21st March 2019
Given the weak start to the year, it looks like Russian GDP growth is shaping up to be weaker in Q1 than in Q4. But February’s activity data were more encouraging, and it does at least appear that growth has strengthened over the course of the first …
20th March 2019
We think that weakness in Germany and softening domestic demand will result in Czech GDP growth slowing to about 2.5% this year. This puts us at the bottom of the range of forecasters. … Slowdown in Czech economy likely to …
19th March 2019
Pro-IMF comments this week from the front-runner in Ukraine’s presidential election race (and comedian), Volodymyr Zelenskiy, reduce the risk that this month’s vote could trigger an adverse reaction in the currency and bond markets. Meanwhile, Russian …
15th March 2019
The stronger-than-expected Turkish industrial production data for January suggest that the worst of the recession has passed. That said, the recovery is likely to slow-going and our forecast for GDP to contract by 2.5% over this year as a whole lies below …
14th March 2019
The growing prevalence of foreign currency deposits in Turkey’s banking sector is symptomatic of the country’s long-standing inflation problem. Unless the central bank breaks with the past and brings down inflation on a sustained basis, deposit …
13th March 2019
The Turkish economy formally entered into recession in the final quarter of last year and, while the worst of the downturn may now have passed, the weak carryover means that we expect GDP to decline by 2.5% this year. Our forecast lies well below the …
11th March 2019
The Turkish lira has been one of the worst-performing EM currencies this week which, in part at least, seems to reflect investors no longer buying the central bank’s hawkish rhetoric. Elsewhere, comments from the Russian central bank support our view that …
8th March 2019
The reasonably small rise in Russian inflation, from 5.0% y/y in January to 5.2% y/y in February, is likely to offer further reassurance to the central bank that a recent VAT hike hasn’t fed into a sharp rise in consumer prices. We think that the next …
6th March 2019
The hawkish tone of the Turkish central bank’s recent communications meant that a rate cut was never likely at today’s meeting. But with inflation set to fall further in the coming months and the economy in dire straits, we suspect that an easing cycle …
The weaker-than-expected Turkey inflation data for February are unlikely to be enough to persuade the central bank to lower interest rates at its monetary policy meeting later this week. We expect the one-week repo rate to be left on hold at 24.00%. … …
4th March 2019
The breakdown of the Central European Q4 GDP figures released this week showed that the surprisingly strong growth rates were driven by a rebound in exports, which appears to be related to a one-off bounce in the auto sector. The manufacturing PMIs for …
1st March 2019
The Czech koruna is likely to defy the central bank’s (CNB’s) expectation that it will appreciate over the coming quarters. One consequence of this is that policymakers will probably raise interest rates further to curb above-target inflation, even if the …
28th February 2019
February’s strong batch of ESIs suggest that resilient domestic demand is helping the economies of Central and Eastern Europe to cope with economic weakness in Germany. … Economic Sentiment Indicators …
27th February 2019
Developments this month suggest that governments in parts of the region are embarking on fiscal stimulus to boost growth and prop up popular support. Recent policy announcements in Russia and Turkey look small, although the Polish government looks set to …
Data published over the past week provided further evidence that the region’s economies slowed at the start of this year. This, coming alongside lower inflation, has resulted in a dovish shift by central banks in parts of the region: Turkey’s central bank …
22nd February 2019
Hungary was one of the fastest-growing EMs in the final quarter of last year. But almost all this was due to temporary factors and we expect that GDP growth will slow sharply this year. … Hungarian outperformance driven by one-off …
21st February 2019
January’s Polish industrial production data will help to allay fears about an abrupt slowdown. But it still appears that Poland’s economy as a whole lost steam at the start of this year and, as external demand weakens, the resilience of industry is …
The recent recovery in Russian private sector credit growth is likely to continue over the coming quarters, supporting our view that, despite the weakness of recent activity data, economic growth will be a little stronger than most expect in 2019. … …
20th February 2019
The improvement in Turkey’s current account position means the lira no longer looks fundamentally misaligned, but the recent period of stability won’t last. While a repeat of last year’s currency crisis is unlikely, the lira will depreciate and it remains …
19th February 2019
Data released this week showing a pick-up in core inflation in Hungary and the Czech Republic support our view that, unless the activity figures take a sharp turn for the worse, central banks in both countries are likely to tighten monetary policy. …
15th February 2019
The strength of the latest GDP figures out of Central Europe, despite weakness in Germany, partly reflects rapid wage growth and robust consumer spending. But it also looks like growth was supported by a rebound in car production, which added an average …
