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Last month’s manufacturing PMIs suggest that GDP growth has remained strong in Central Europe in Q4, probably at around 4.5-5.0% y/y. The pick-up in Russia’s PMI was also encouraging in light of the recent weakness in industry. … Manufacturing PMIs …
1st December 2017
In this Focus, we highlight the scale of Turkey’s credit boom and warn that the build-up of vulnerabilities in the banking sector is more of a concern than most acknowledge. … An anatomy of Turkey’s credit …
30th November 2017
November’s Economic Sentiment Indicators suggest that the pace of economic growth has remained strong in the major economies of Central and Eastern Europe in Q4. The surveys are consistent with growth of around 5% y/y in the region as a whole. … Economic …
29th November 2017
Recently-released figures showed that GDP growth in Central and Eastern Europe (CEE) picked up to a post-financial crisis high of 5.3% y/y in Q3. Growth strengthened in most countries in the region – the exceptions being the relatively small economies of …
24th November 2017
Core inflation has been slower to rise in Poland than in the rest of Central Europe this year, but survey-based measures of price expectations suggest that it is set to pick up markedly over the coming quarters. This is consistent with the underlying …
22nd November 2017
The Hungarian MPC left both its three-month and overnight deposit rates on hold today but the Council announced unconventional measures to ease policy, including interest rate swaps and a mortgage bond purchase programme. Further details of these measures …
21st November 2017
The drop in the Turkish lira over the past month has already prompted the central bank (CBRT) to nudge up the average cost of the funding it provides to commercial banks and to begin auctioning non-deliverable forward contracts in an effort to shore up …
EM inflation dropped to an eight-year low in the middle of this year, but it has now started to rise. The recent increase in oil prices will have pushed it higher this month. And a combination of rising food inflation and a build-up of core price …
20th November 2017
Russia’s activity data for October suggest that growth remained soft at the start of Q4, at around 1.7% y/y. October data for Poland (also released today) were much stronger and suggest that GDP growth may have picked up to as much as 5% y/y. … Russia & …
We don’t find compelling evidence to support the argument that the slowdown in Russia’s economy in Q3 was the result of mounting capacity constraints. In contrast, our view is that there is still a sizeable amount of spare capacity in the economy. This is …
17th November 2017
The European Parliament moved one step closer to sanctioning Poland earlier this week in response to the government’s controversial proposals to reform the judiciary. In this Update, we explain how this (convoluted) process works, and why sanctions …
Third quarter GDP data for Central and Eastern Europe (CEE) showed that growth in the region as a whole picked up to a nine-year high of 5.3% y/y. We still think growth will slow in 2018, but today’s data mean the risks to our forecasts lie to the upside. …
14th November 2017
Russian GDP growth in Q3 was softer than expected, at 1.8% y/y, and we have revised down our growth forecast for 2017 as whole as a result (to 1.8%). However, we expect growth to pick up next year and our 2018 forecast of 2.5% is above consensus. … Russia …
13th November 2017
The batch of preliminary Q3 GDP figures due next week in Emerging Europe are likely to show that growth accelerated in most of the region. While the pace of expansion probably softened a touch in Russia, it appears to have strengthened in Central Europe, …
9th November 2017
The rise in Czech inflation to a five-year high of 2.9% y/y in October was driven entirely by a sharp pick-up in food inflation, and by our estimates, core inflation eased a little. As a result, while the chances of a rate hike at the MPC meeting in …
The Polish MPC left interest rates unchanged today, but the post-meeting press release seems to confirm that the Council is becoming more hawkish. We think inflation will rise above target in the first half of next year, which should ultimately prompt …
8th November 2017
The Romanian MPC’s decision to raise its overnight deposit interest rate represents a move to tighten monetary policy further. And the hawkish post-meeting press statement supports our view that interest rates are likely to be raised by more than most …
7th November 2017
The fall in Russian inflation to 2.7% y/y in October means another 25bp cut at the central bank’s Board meeting in December is highly likely. Inflation has probably reached a trough, but we expect the headline rate to remain below the central bank’s 4% …
Romania’s widening current account deficit is not quite as alarming as the headline figure would suggest, but rapid import growth has still increased the country’s dependence on capital inflows. With the government continuing to loosen fiscal policy, we …
6th November 2017
The jump in Turkish inflation last month, to 11.9% y/y, was worryingly broad based. There are reasons to think that inflation will begin to fall significantly from December, but in the near-term policymakers at the central bank will keep monetary …
3rd November 2017
The statement accompanying the Czech MPC’s meeting – at which it resumed its tightening cycle via a 25bp hike to the policy rate – was more dovish than we had anticipated. Accordingly, we think that the Council will hold fire at December’s meeting and …
2nd November 2017
The victory of the ANO party in the recent Czech election has put the spotlight back onto the rise of populism in Central Europe. In this Update, we take a closer look at the political and economic implications of this shift, and tease out some of the …
1st November 2017
October’s manufacturing PMI for Turkey – which fell to a six-month low – supports our view that following an impressive Q3, growth will slow in Q4. Elsewhere in the region, the Czech PMI painted a much brighter picture and echoes other surveys which …
The argument made recently that Turkey’s GDP data are being manipulated by the authorities and that the recent rapid growth rates aren’t plausible doesn’t seem to square with other available evidence. That said, the statistics office clearly rushed out …
31st October 2017
The Turkish lira has strengthened a little today, but it has been the worst-performing major EM currency this month. We have revisited our forecasts and we now expect further falls in the currency, taking it to 4.00/$ by end-2018 and 4.25/$ by end-2019 …
30th October 2017
This month’s Economic Sentiment Indicators suggest that GDP growth remained strong in the major economies of Central and Eastern Europe at the start of Q4. The surveys are consistent with growth remaining close to 5% y/y in the region as a whole. … …
Aggregate EM inflation ticked down between August and September on the back of a fall in food inflation in East Asia. This appears to have been due to a shift in the timing of holidays in the region and should reverse in October. That being said, while …
27th October 2017
The Russian central bank statement, which accompanied today’s decision to cut the policy rate by 25bp, suggests that policymakers have become increasingly confident that inflation will remain low and that they see more scope for loosening than before. …
The hawkish tone of today’s Turkish MPC statement showed an overdue concern with high inflation (and expectations) and suggests that cuts in interest rates are off the agenda. That said, with inflation set to ease over the first half of 2018 and the …
26th October 2017
Events over the past 24 hours have confirmed our view that, while the centre-right ANO party would prevail in the country’s elections, the challenging part will be forming a coalition government. Financial markets are likely to look through the political …
24th October 2017
Growth in Emerging Europe probably picked up further in Q3, but we think that this will mark the peak in the economic cycle and expect aggregate regional growth to weaken a little next year. Admittedly, Russia’s recovery, which is only in its early …
23rd October 2017
The latest economic data suggest that growth in Emerging Europe as a whole picked up further in Q3 and one of the main drivers behind this appears to have been stronger consumer spending. Retail sales in Russia rose at their fastest pace since 2014 last …
20th October 2017
The surprising jump in Turkish inflation in the past few months appears to be mainly due to a combination of a rise in dairy and egg inflation, the lingering impact of previous falls in the lira as well as a rebound in clothing inflation from oddly low …
19th October 2017
Russian activity data for September suggest that GDP growth over Q3 as a whole probably came in at around 2.0% y/y, which would be a little weaker than in Q2 (2.5% y/y). But the economy remains in reasonably good shape, and the recovery in consumer …
18th October 2017
The batch of Polish activity data for September, released today, suggests that the economy grew by around 4.8% y/y in Q3, which would be the best performance in six years. … Poland Activity Data …
The centre-right ANO is likely to emerge as the single largest party in Friday’s parliamentary election in the Czech Republic, which may open the door to looser fiscal policy. That said, there are reasons to think that any fiscal stimulus would be more …
17th October 2017
Turkey’s recent diplomatic spat with the US – and the subsequent sell-off in financial markets – has refocussed attention on the economy’s external vulnerabilities. We have two areas of concern: the increasing reliance of Turkish banks on wholesale …
11th October 2017
The rise in Czech inflation to a five-year high of 2.7% y/y in September supports our view that the next hike in the policy interest rate – taking it from 0.25% to 0.50% – will come at the CNB Board meeting in early November. … Czech CPI …
9th October 2017
The drop in Russian inflation to a fresh low of 3.0% y/y in September means that another cut in interest rates is all but guaranteed at this month’s CBR Board meeting. The fact that core inflation softened opens up the possibility of another 50bp cut but, …
5th October 2017
Poland’s MPC left interest rates unchanged today and the press statement and conference that followed struck a dovish tone. While headline inflation is likely to edge down in the final months of this year, we expect a pick-up in core inflation to cause …
4th October 2017
The Romanian MPC’s decision to raise its overnight deposit interest rate represents a move to tighten monetary policy – even though the policy rate was left unchanged. Policymakers struck a fairly hawkish tone in the post-meeting press statement and …
3rd October 2017
The jump in Turkish inflation, to 11.2% y/y last month, from 10.7% y/y in August, means that the interest rate cuts we had expected before the end of this year are looking less likely. We still think inflation will fall over the next six to nine months, …
Growth in Emerging Europe has generally surprised on the upside in recent quarters, which is consistent with the above-consensus forecasts we made at the start of this year. We expect further positive surprises from Russia over the next year but think …
2nd October 2017
Last month’s manufacturing PMIs for Emerging Europe painted a positive picture. The surveys suggest that economic growth accelerated further in Q3 in Central Europe and remained robust in Russia. Even in Turkey – the only country where the PMI fell – the …
In this Focus, we answer five key questions on Russia’s recently-approved fiscal rule, and explain what it means for the government’s deficit, debt and oil funds. … A primer on Russia’s new fiscal …
28th September 2017
This month’s Economic Sentiment Indicators for Central and Eastern Europe suggest that regional GDP may have expanded by as much as 5% y/y in Q3. However, this probably marks the peak for growth and we expect the region’s economies to slow over the coming …
The Czech MPC’s decision to keep rates on hold today was a very close call and we think that an interest rate hike at the next MPC meeting on 2nd November is highly likely. Following that, our central view is that there will be a further 50bp of hikes in …
27th September 2017
The move by Hungary’s MPC to loosen monetary policy last week appears to have been aimed at weakening the forint, which looks to us like a step in the wrong direction. The key threat to inflation and external competitiveness stems from rising wages, …
26th September 2017
Worries about spillovers from the independence referendum being held today in Iraq’s Kurdish region have led to a sharp drop in Turkey’s stock market over the past week. However, any impact on Turkey’s real economy from the referendum is likely to be …
25th September 2017
Aggregate EM inflation rebounded in August, having fallen to an eight-year low in July. But while we expect fuel and food inflation to edge up over the coming months, easing core price pressures should keep headline EM inflation subdued. … EM inflation …
