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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
Russian financial markets have tumbled following the naval dispute with Ukraine, but the big picture is that local asset prices have held up well this month given the backdrop of falling oil prices and a tense standoff with a neighbouring country. This …
26th November 2018
This week’s U-turn by Poland’s government over a controversial judicial reform suggests that policymakers are adopting a less divisive stance in the run-up to next year’s elections. While this is unlikely to have a significant macroeconomic impact, it …
23rd November 2018
Polish activity data for October were stronger than expected and suggest that the economy continued to motor along at a rapid pace at the start of Q4. … Poland Activity Data …
22nd November 2018
The improvement in the Russian activity data in October suggests that, after growing by a disappointing 1.3% y/y in Q3, the economy regained momentum at the start of Q4. We expect this recovery to be sustained in 2019 and think that GDP growth will be …
20th November 2018
We’ve argued for a long time that the monetary stance of the Hungarian National Bank (MNB) is far too accommodative, and it finally appears that tightening is on the horizon. The complex nature of the Hungarian monetary framework, though, means that the …
19th November 2018
The Russian government seems to have softened its line about cutting oil output to prop up prices this week, but given that output surged in October, any cuts would have a limited economic impact. Elsewhere, GDP data released on Wednesday showed that …
16th November 2018
The weaker-than-expected Turkish industrial production data for September add to the evidence that the economy is entering a deep recession. Our GDP growth forecasts lie well below the consensus. … Turkey Industrial Production …
Faster GDP growth in Poland and Hungary reinforces our view that central banks in both countries will begin to tighten monetary policy over the coming quarters. … Central & Eastern Europe GDP …
14th November 2018
The slowdown in Russian GDP growth in Q3, to 1.3% y/y, appears to have been driven by broad-based weakness across the economy. But the early signs are that growth will recover in Q4, and we still expect the pace of GDP growth in 2019 to be a bit stronger …
13th November 2018
The sharp fall in the Turkish lira since the start of the year has pushed up inflation and caused financial conditions to tighten markedly, tipping the economy into recession. But there are signs that the boost to Turkey’s external competitiveness is …
GDP data to be released next week are likely to confirm that growth across Emerging Europe continued to weaken in Q3. Meanwhile, figures published this week showed that inflation picked up in most of the region last month. While we doubt that will prompt …
9th November 2018
There’s little evidence so far to suggest that the fall in the ruble this year has boosted Russia’s economy, but we think the positive effects will begin to materialise in 2019. … Has a weaker ruble helped Russia’s …
The net impact of a new vehicle emissions testing procedure on Q3 GDP growth appears to have been minimal in Poland and the Czech Republic, but could have knocked up to 0.4%-pts off quarter-on-quarter growth in Hungary. More importantly, though, other …
8th November 2018
The relatively more hawkish tone adopted by the Polish MPC in its post-meeting press conference today suggests that the start of a monetary tightening cycle isn’t too far away. We think that policymakers will raise their policy interest rate around the …
7th November 2018
The slightly smaller-than-expected rise in Russian inflation, to 3.5% y/y, last month supports our view that the central bank will refrain from tightening monetary policy further. Markets, in contrast, are still pricing in some additional interest rate …
6th November 2018
The stronger-than-expected rise in Turkish inflation in October, to 25.2% y/y, is unlikely to prompt further interest rate hikes from the central bank. Instead, the main risk is that, with pipeline price pressures easing and the headline now at or close …
5th November 2018
The latest comments from Turkey’s central bank suggest that policymakers are considering unwinding some of the recent rate hikes, reinforcing our view that the MPC isn’t serious about tackling the country’s inflation problem. Meanwhile, PMI data released …
2nd November 2018
The forecasts accompanying today’s Czech monetary policy meeting imply that the CNB’s tightening cycle is now finished. Following seven interest hikes, we agree that the bulk of tightening has already happened, but we think that there is still scope for …
1st November 2018
The continued weakness of Turkey’s PMI provides further evidence that the economy has fallen into a deep recession. Elsewhere, the drop in the Czech PMI last month suggests that softness in the country’s industrial sector in Q3 lingered on into Q4. But …
Growth in most of Emerging Europe will continue to slow over the next couple of years, and by more than most expect. The slowdown is set to be sharpest in Turkey, where the recent currency crisis will result in a slump in domestic demand, pushing the …
31st October 2018
Our weighted average of the Economic Sentiment Indicators for Central and Eastern Europe (CEE) fell to an 11-month low in October, suggesting that GDP growth across the region continued to slow at the start of Q4. … Economic Sentiment Indicators …
30th October 2018
The Russian central bank’s statement accompanying today’s Board meeting reinforces our view that September’s interest rate hike was intended as a one-off. Whereas the financial markets are pricing in further tightening, we think it’s most likely that the …
26th October 2018
The worse-than-expected performance of the ruling PiS party in Poland’s local elections last weekend is likely to prompt policymakers in Warsaw to ramp up social spending ahead of next year’s parliamentary elections, cushioning the slowdown in GDP growth. …
After a strong Q2, growth in Emerging Europe as a whole slowed in Q3, from 3.5% y/y to around 2.8% y/y. In Russia and Poland, this slowdown has been relatively gradual and driven by weakness in manufacturing sectors. Turkey’s economy has, unsurprisingly, …
25th October 2018
The Turkish central bank’s decision to leave interest rates unchanged today and the accompanying statement reinforce our view that last month’s aggressive rate hike didn’t represent a shift back to orthodoxy. Interest rates are unlikely to be raised …
The announcement on Friday that Ukraine has come to an agreement with the IMF to replace its current bailout package should reduce risks posed by the government’s large upcoming FX debt repayments. But compliance will remain a major hurdle and problems …
22nd October 2018
The recent rallies in the Russian ruble and the Turkish lira have added weight to our view that central banks in both countries will refrain from tightening policy further when they meet next week. Meanwhile, data that slipped under the radar this week …
19th October 2018
Polish activity data for September were softer than expected and suggest that GDP growth weakened from 5.1% y/y in Q2 to 4.5% y/y in Q3. This slowdown is likely to continue over the next few quarters. … Poland Activity Data …
The softness of the Russian activity data for September means that overall GDP growth probably weakened to around 1.5% y/y in Q3 (from 1.9% y/y in Q2). That said, there are still reasons to think that the economy will strengthen in the coming months. … …
17th October 2018
