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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
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 …
