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Developments in the US Senate indicate that sanctions on Russia are likely to tighten in the coming months. Historically, the introduction (or threat) of sanctions has tended to result in a long-lasting premium on Russian dollar bonds and the currency. …
14th February 2019
GDP data for Central and Eastern Europe showed that growth in the region held up pretty well at the end of last year – especially considering the ongoing weakness in Germany. Even so, growth still weakened everywhere, and today’s data probably mark the …
The bigger-than-expected fall in Turkish industrial production in December adds to the evidence that the economy performed terribly in the final quarter of last year. We think that GDP may have contracted by as much as 4.0% y/y in Q4. … Turkey Industrial …
We suspect that the sharp slowdown in Russia’s manufacturing sector in the second half of 2018 was due to a fall in public spending on military and railway transport. If we’re right, manufacturing should recover in 2019 as defence and infrastructure …
12th February 2019
The much stronger-than-expected Russian GDP growth figure for 2018, released this week, led to accusations that Rosstat is manipulating the figures, but we think that these data actually paint a pretty accurate picture of Russia’s economy last year. …
8th February 2019
The less hawkish nature of the Russian central bank’s statement means that we no longer expect an interest rate hike in the coming months. Instead, with inflation likely to return to target in 2020, we think that interest rate cuts will come back onto the …
The Czech National Bank’s post-meeting communications made clear that concerns about the external environment resulted in interest rates being left on hold – rather than hiked – today. Given the Bank Board’s focus on wages and inflation, additional …
7th February 2019
The softer-than-expected Russian inflation figure for January, of 5.0% y/y, is likely to temper some of the central bank’s hawkish rhetoric when the Board meets on Friday. Given the central bank’s tendency to respond to rising inflation (and …
6th February 2019
The stronger-than-expected Russian 2018 GDP growth figure of 2.3% suggests that Rosstat has made significant upwards revisions to the quarterly growth figures for the first half of last year. Based on this, it appears that growth has already peaked and, …
4th February 2019
The slight rise in Turkish inflation in January was driven by higher food inflation but even so, coupled with the hawkish tone of the central bank’s latest Inflation Report, it probably means that interest rate cuts are at least a few more months away. … …
The budget surplus recorded in Russia in 2018 has put the spotlight on austerity measures, but it actually looks like fiscal policy will provide more support to the economy this year than it did in 2018. Meanwhile, the Turkish central bank’s latest …
1st February 2019
Another soft batch of PMI data from Central Europe suggests that the continued weakness of euro-zone industry is weighing heavily on the region’s export-led manufacturing sectors. On past form, the latest PMI readings point to a contraction in Central …
Data released over the past month suggest that regional GDP growth slowed from to 2.4% y/y in Q3 to a two-year low of 1.2% y/y in Q4. This was due mostly to the economic slump in Turkey, where activity has collapsed in the aftermath of last year’s lira …
31st January 2019
The preliminary estimate of Polish annual 2018 GDP, which showed an expansion of 5.1% over the year as a whole, suggests that the economy slowed in Q4. Inventories appear to have exerted a sizeable drag on growth in the final quarter and are likely to …
A weak batch of ESIs for January supports our view that the economies of Central and Eastern Europe will slow by more than more expect over the course of 2019. … Economic Sentiment Indicators …
30th January 2019
GDP growth across Emerging Europe is likely to slow in 2019, and by more than most anticipate. Turkey’s economy will continue to suffer from the effects of last year’s lira crisis, while the slowdown in Germany will weigh on the highly-open Central …
29th January 2019
The batch of Russian activity data for December suggests that the economy weakened at the end of last year. Even so, GDP growth over Q4 as a whole was probably a little stronger than it was in Q3 (about 1.8-2.0% y/y, up from 1.5% y/y). … Russia Activity …
25th January 2019
A raft of weak activity and survey data released this week reinforces our relatively downbeat view on the outlook for growth across Emerging Europe this year. Slowing growth seems to be worrying some central banks in the region – policymakers in Poland …
The Romanian government’s surprise introduction of a bank tax has put the leu under pressure recently and the country’s wide current account deficit suggests that further currency falls lie in store. We think that the leu will depreciate by about 8%, to …
23rd January 2019
A soft batch of December activity data suggests that GDP growth slowed a touch at the end of last year. Over 2018 as a whole, it appears that the Polish economy grew by a robust 5%, but the slowdown is likely to continue over the coming quarters. … Poland …
22nd January 2019
Hawkish comments from Hungary’s MPC this week support our view that monetary policy will be tightened by more than is priced into markets. Meanwhile, emergency economic powers granted to Turkey’s President Recep Tayyip Erdogan heighten the risk of policy …
18th January 2019
The Turkish central bank’s decision to keep interest rates on hold suggests that policymakers may have been unnerved by the recent wobble in the lira. But with inflation likely to ease further, the economy in the midst of a deep recession and political …
16th January 2019
Low oil prices, cuts to oil production and the central bank’s hawkish shift have prompted us to nudge our 2019 growth forecast for Russia down to 2.0% (from 2.3%), although that still leaves us a bit above the consensus. Growing signs that slack in the …
15th January 2019
Past experience suggests that the macroeconomic conditions are now in place for the Turkish MPC to start reversing last year’s monetary tightening. We expect the one-week repo rate to be cut by 50bp at Wednesday’s meeting. But the central bank’s failure …
14th January 2019
Further evidence this week that the Turkish economy is in the midst of a severe recession adds to the reasons to expect that the MPC will cut interest rates next week. Meanwhile, another batch of robust activity data suggests that the economies of Central …
11th January 2019
Weakness in the euro-zone and softer domestic demand will weigh on GDP growth across Central and Eastern Europe (CEE) this year and our forecasts are below consensus. Looser fiscal policy should make Poland an outperformer, while Romania and Hungary will …
10th January 2019
A strong batch of ESIs for December provided some positive news for the economies of Central and Eastern Europe (CEE) following the recent release of a poor set of PMIs and a raft of weak activity data from the euro-zone. The ESIs suggest that regional …
8th January 2019
Investors pared back their expectations for interest rate hikes in Central Europe this week, but we still think that a fresh pick-up in inflation will prompt more monetary tightening than most anticipate over the course of 2019. As a result, the recent …
4th January 2019
The further fall in Turkish inflation in December, combined with the weakness of the latest activity and the recovery in the lira, means that the central bank is likely to press ahead with a rate cut at this month’s MPC meeting. We have pencilled in a …
3rd January 2019
December’s weak manufacturing PMI will strengthen the Turkish central bank’s case that monetary policy should be loosened. We think that an interest rate cut at this month’s MPC meeting is more likely than not and have pencilled in a 50bp reduction in the …
2nd January 2019
The Romanian government’s measures to tighten fiscal policy next year, announced on Wednesday, support our long-held view that GDP growth will slow by more than most expect in 2019. Meanwhile, the latest data from Turkey provide further evidence that the …
21st December 2018
Russian activity data for November add to the evidence that, after expanding by a tepid 1.5% y/y in Q3, the economy has regained momentum in Q4. We expect that this recovery will be sustained over the coming quarters and think that GDP growth will be …
19th December 2018
The fall in inflation across much of Emerging Europe last month was surprisingly sharp, which in part was due to lower oil prices but also (and more unexpectedly) a dip in food inflation. One consequence is that the Turkish central bank is likely to cut …
The statement accompanying today’s Hungarian MPC meeting provided the clearest sign yet that policymakers are shifting towards the start of a tightening cycle. For our part, we think that interest rates will rise further next year than financial markets …
18th December 2018
The weaker-than-expected Turkish industrial production data for October suggest that, after contracting in Q3, the economy has probably entered a technical recession in Q4. Weak economic growth, coupled with last month’s fall in inflation and the recovery …
17th December 2018
The creation of a controversial parallel new court system in Hungary – signed into law on Wednesday – will bring the government into further conflict with Brussels, but the economic impact is only likely to be significant in the longer-run. Meanwhile, in …
14th December 2018
Russian central bank governor Elvira Nabiullina’s hawkish post-meeting press conference reinforced our impression that another hike in interest rates is likely over the next few months. We now expect a 25bp hike to 8.00% early next year. We have revised …
The statement accompanying today’s decision by Turkey’s central bank to leave policy on hold suggests that the MPC is contemplating rate cuts. With inflation falling back and political pressure on the central bank to lower rates set to build ahead of …
13th December 2018
After a disappointing Q3, leading indicators suggest that Russia’s economy strengthened in Q4. We expect that GDP growth will rebound to around 1.8-2.0% y/y over the quarter as whole. … Russia’s recovery regaining …
11th December 2018
The effects of August’s currency crisis caused Turkey’s economy to contract in Q3 and more timely evidence suggests that the downturn deepened in Q4. Our forecast that GDP will fall by 0.5% over 2019 as a whole lies well below the consensus. … Turkey GDP …
10th December 2018
Signs of softer inflation and weak economic activity will almost certainly prompt the Turkish MPC to strike a dovish tone at Thursday’s meeting. Investors seem to share our concerns that policymakers will move too quickly to loosen policy and fail to …
7th December 2018
The rise in Russian inflation, to 3.8% y/y in November, from 3.5% y/y in October, was driven entirely by higher food inflation. As a result, while the central bank Board meeting next Friday will be a close call, we think policymakers will refrain from …
6th December 2018
Stronger investment drove a pick-up in GDP growth across Central Europe in Q3, despite a big drag from net trade. But investment is likely to lose steam over the coming quarters, which is part of the reason why we expect that growth will slow next year. … …
5th December 2018
The recent slowdown in Russian retail spending appears to be close to bottoming out. But we doubt that retail sales will grow by any more than 2.0-2.5% y/y over the next twelve months. … Retail spending to remain a soft spot in Russia’s …
4th December 2018
November’s PMIs suggest that Central European industrial production growth will weaken markedly in the final months of 2018. Even so, with other sectors holding up well, that’s unlikely to result in a sharp slowdown in overall GDP growth in Q4. … …
3rd December 2018
The greater-than-expected fall in Turkish inflation in November, to 21.6% y/y, increases the chances that the central bank pushes ahead with an interest cut in the coming months. … Turkey Consumer Prices …
Lower oil prices will benefit most countries in Emerging Europe and, for the major loser, Russia, oil at $60pb is manageable – although we do think that it will agree with Saudi Arabia to cut oil output next week. At the margin, the scale and pace of the …
30th November 2018
Our weighted average of the Economic Sentiment Indicators for Central and Eastern Europe (CEE) rose in November, suggesting that regional growth remained at around 4.5% y/y in Q4. … Economic Sentiment Indicators …
29th November 2018
The latest fall in oil prices will reduce Russia’s export revenues, but the budget and current account should remain in surplus and a significant shift in fiscal (or monetary) policy is unlikely. As a result, we are sticking to our non-consensus view that …
28th November 2018
Strong budget positions in Poland and the Czech Republic will allow governments to ramp up spending next year. That’s one key reason why we expect that GDP growth in 2019 in these countries will be faster than in Hungary and Romania, where fiscal policy …
27th November 2018
