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Activity data released in Russia, Turkey and Poland suggest that regional GDP growth remained strong at around 4% y/y in Q2. Among a number of monetary policy decisions due next week, we expect Turkey’s central bank to hike interest rates by another …
20th July 2018
June’s activity data for Russia were a bit soft, but remain consistent with a pick-up in GDP growth from 1.3% y/y in Q1 to around 2.5% y/y in Q2. … Russia Activity Data …
18th July 2018
The stronger-than-expected Turkish industrial production data for May, at first sight, suggest that the economy has weathered the recent financial market turmoil, but we doubt that this resilience will last. Indeed, there are signs that underlying …
17th July 2018
Turkish President Erdogan’s decisions this week to exclude investor-friendly members from his new cabinet and renew his calls for lower interest rates have rattled local financial markets and, ironically, strengthened the case for further rate hikes . …
13th July 2018
Poland’s MPC bucked the regional trend today by retaining its ultra-dovish stance. However, we think that Polish policymakers will soon start to follow their neighbours. Inflation is likely to rise above the central bank’s 2.5% target range by early-2019, …
11th July 2018
Moves over the past 24 hours by Turkey’s President Erdogan to consolidate his power is likely to result in pressure for looser monetary and fiscal policy, but this will ultimately come at the cost of weaker (and more volatile) economic growth, higher …
10th July 2018
The modest decline in Russian inflation in June, to 2.3% y/y, was mainly a result of a sharp fall in fruit and vegetable inflation. And while headline inflation is still weak, there were some tentative signs in the data that broader price pressures may be …
6th July 2018
The infringement procedure launched this week by the European Commission against Poland – in response to controversial legal reforms and the associated worries about the erosion of judicial independence – has put the country in the headlines this week. We …
Although the National Bank of Romania left its key policy rate unchanged today, the Bank is using open market operations to tighten monetary conditions. We think that policymakers will return to conventional interest rate hikes to tighten policy in the …
4th July 2018
Yesterday’s stronger-than-expected consumer price figures from Turkey provides further evidence that falls in the lira are feeding through into higher inflation more quickly and to a greater extent than had previously been the case. More than anything, …
The much stronger-than-expected rise in Turkish inflation in June, to 15.4% y/y, is likely to prompt the central bank to hike interest rates, perhaps by 100bp, at its meeting later this month. … Turkey CPI …
3rd July 2018
Last month’s manufacturing PMIs made for disappointing reading in most of Emerging Europe. After plunging to a nine-year low in May, the Turkish survey remained weak in June, suggesting that the recent sharp tightening of financial conditions is hitting …
2nd July 2018
Victories for President Erdogan and the AKP in Turkish elections last weekend have supported a rally in local markets over the course of this week but this has overshadowed the latest survey data which reinforce our view that the economy will experience …
29th June 2018
The upwards revisions to Russia’s industrial production figures have raised concerns about the quality of the data but, based on the figures released so far, the new series does seem to reflect economic conditions more accurately than the older series. … …
Central banks across Emerging Europe have become increasingly hawkish in the past few weeks, supporting our view that policy in the region will (in most places) be tighter than most expect over the coming years. A sell-off in the lira since early May has …
28th June 2018
At a regional level, Economic Sentiment Indicators for Central and Eastern Europe were weaker in Q2 than in Q1, supporting our view that regional GDP growth peaked in Q3 2017. … Economic Sentiment Indicators …
The statement and press conference following today’s Czech MPC meeting – at which the Council resumed its tightening cycle – were on the hawkish side, supporting our view that further rate hikes are in store. We expect that the policy rate will be raised …
27th June 2018
The ECB’s ‘tapering’ of its asset purchases later this year and probable rate hikes in 2019 are unlikely to have much economic or financial market impact in Central and Eastern Europe (CEE). But, at the margin, it does add to the reasons to think that …
26th June 2018
Victories for President Erdogan and his AKP-led alliance in Turkey’s elections have been welcomed by financial markets, but history suggests that this rally will be short-lived, particularly if Mr. Erdogan uses the new strengthened presidential powers to …
25th June 2018
The more hawkish communications from Hungary’s MPC this week support our long-held view that ultra-loose monetary policy will be reined in this year. The hawkish shift caused market expectations for interest rates to rise sharply, although we still think …
22nd June 2018
This weekend’s elections in Turkey, which will mark a shift to a presidential political system, have put markets on edge amid fears of a further tilt towards unorthodox policy under a (strengthened) President Erdogan. The vote is unlikely to have much …
21st June 2018
The batch of Polish activity data for May suggests that the economy is set to slow from 5.2% y/y in Q1 to around 4% y/y in Q2. … Poland Activity Data …
The strength of May’s Russian activity data, coupled with upwards revisions to the industrial output figures, suggests that GDP growth picked up to more than 2% y/y, compared with the latest estimate of 1.3% y/y for Q1. We will let the revised industrial …
20th June 2018
The post-meeting communications following today’s Hungarian MPC meeting offered some strong hints that the recent era of ultra-loose monetary policy is in its final days. We think that unconventional easing measures will be reined in from September …
19th June 2018
We have warned about the risk of a sharp slowdown in Turkey for some time and this now seems to be materialising. The economy is likely to experience a quarter or two of negative growth this year. A strong Q1 means that GDP growth will be around 3.5% over …
18th June 2018
Govenor Nabiullina’s hawkish comments at today’s post-meeting press conference are likely to reinforce views in the markets that the central bank’s easing cycle is at an end. For our part, we think the impact of the government’s recently-announced VAT …
15th June 2018
The announcement that Russia’s Cabinet plans to raise the retirement age is a step in the right direction. While there are question marks about whether it will be implemented in full, it could stop the working-age population from falling and boost …
14th June 2018
Romania’s economy is overheating and, unless monetary policy is tightened markedly in the months ahead, a nastier adjustment and more abrupt slowdown in GDP growth lies in wait.Romania’s economy is overheating and, unless monetary policy is tightened …
12th June 2018
The Turkish economy grew by a faster-than-expected 7.4% y/y in Q1 but, crucially, this predates the recent financial market turmoil. An abrupt slowdown is on the cards over the coming quarters. … Turkey GDP (Q1 2018) & Czech CPI …
11th June 2018
After a strong Q1, Polish fixed investment growth will stay robust over the duration of 2018. However, this won’t be enough to prevent headline GDP growth from slowing. … Polish investment growth will remain …
8th June 2018
The Turkish central bank’s decision to hike its one-week repo rate by 125bp, to 17.75%, is a tentative sign that it is shifting its focus away from simply shoring up the lira and towards tackling high and rising inflation. The key now is whether more …
7th June 2018
The imposition of more stringent US financial sanctions in April seems to have resulted in a long-lasting premium in Russia’s currency and bond market. But there has been little convincing evidence of an impact on the real economy. And if negative …
5th June 2018
Russian inflation was unchanged at 2.4% y/y in May, providing further evidence that the ruble’s fall in April has not led to a build-up in price pressures. This should give the central bank confidence to resume its easing cycle later this month. … Russia …
GDP breakdowns for the economies of Central Europe showed that, while domestic demand remained strong in Q1, net trade dragged on growth across the region. With capacity constraints starting to bite, this drag will continue over the course of 2018/19. … …
Despite the sharp rise in Turkish inflation in May, to 12.1% y/y, the rally in lira over the past week or so means that we think that the central bank will decide to stand pat at its MPC meeting on 7th June. … Turkey CPI …
4th June 2018
Last month’s manufacturing PMIs fell in most of Emerging Europe, reinforcing our view that regional growth has peaked. The PMI plunged to a nine-year low in Turkey, which is the first sign that the sharp tightening of financial conditions in recent weeks …
1st June 2018
Last week’s emergency rate hike by Turkey’s central bank has caused a rebound in the lira and past experience suggests that the rally may have a bit further to run over the coming weeks. But there are a number of potential flashpoints on the horizon and …
31st May 2018
Recent developments in Italy do not pose an immediate threat to economies in Emerging Europe but a significant escalation in the crisis would cause problems for countries in the region, particularly Croatia, Slovakia and Romania. … How could Italy’s …
At a regional level, May’s Economic Sentiment Indicators for Central and Eastern Europe (CEE) were a bit stronger than in April, but the latest readings still support our view that GDP growth in CEE has now peaked. Meanwhile, Polish inflation remained …
30th May 2018
The decision by Turkey’s central bank to begin using the one-week repo rate as its key policy tool looks less like an effort to simplify its monetary policy framework (as has been suggested by some), and more like a way to create room to raise market …
29th May 2018
The plunge in the Turkish lira and dislocation in local markets in recent weeks has resulted in a severe tightening of broader financial conditions. Past experience suggests that a tightening on the scale seen so far is likely to be followed by a sharp …
25th May 2018
Turkey has been in the grips of a currency crisis which forced the central bank to hike interest rates by 300bp on 23rd May, but that only provided brief respite for the lira. For now, there are signs that President Erdogan has taken the hint. He kicked …
24th May 2018
The plunge in the Turkish lira over the past few days has been steeper than that which triggered abrupt monetary tightening in 2014 and 2017. We expect the MPC to hold an interim meeting over the coming days to raise interest rates by at least 200bp. If …
23rd May 2018
The latest Russian activity figures suggest that GDP growth picked up to about 1.5% y/y at the start of Q2. These data also provide early evidence that the tightening of US sanctions and the fall in the ruble in early April have had little impact on the …
22nd May 2018
Rapid wage growth in Central Europe has yet to feed into a meaningful pick-up in inflation. Part of the softness of Central European inflation reflects weak price pressures in the euro-zone. But it has also been the case that firms have absorbed higher …
17th May 2018
Russian GDP expanded by a weaker-than-expected 1.3% y/y in Q1, but the data do at least confirm that the economy is recovering from its slowdown in late 2017. And we think growth will strengthen by more than most expect over the rest of this year. … …
16th May 2018
Market sentiment towards Turkey is quickly evaporating as fears mount over the build-up of external vulnerabilities, high and rising inflation, and growing concerns that the central bank’s independence is being eroded. Paradoxically, political pressure …
The Turkish lira’s decline in recent weeks will keep headline inflation elevated, prompting the central bank to shrug off political pressure and hike interest rates in the coming months. The big risk is that the lira’s decline sets off a vicious cycle of …
15th May 2018
GDP data for Central and Eastern Europe (CEE) showed that growth in the region as a whole expanded by 4.5% y/y in Q1. While this is still strong by recent standards, it’s weaker than a recent peak of 5.6% y/y in Q3 and we think that growth across CEE will …
The deterioration in Turkey’s current account position since mid-2017 has been driven by a surge in gold imports, a rising energy import bill and strong domestic demand feeding through into imports of other goods. But with capital inflows now slowing, the …
14th May 2018
