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The latest data suggest that, following a strong Q2, growth in Emerging Europe as a whole picked up further in Q3. Activity figures from Poland improved in July and August and the early signs are that Turkey’s economy will record very robust growth in Q3, …
20th September 2017
The decision by the Hungarian MPC to ease monetary conditions further today looks like a policy misstep. Mounting capacity constraints and rapid wage growth mean that we think inflation will turn out to be much stronger next year than the central bank …
19th September 2017
Russian activity data for August suggest that GDP growth may have eased a little in Q3, to around 2% y/y, from 2.5% y/y in Q2. But that would still be a reasonably strong pace of expansion, and it looks like the drivers of growth are becoming more broad …
The batch of strong Polish activity data for August suggests that the economy is on course to grow by an impressive 4.5% y/y in Q3, up from 3.9% y/y in Q2. However, this is likely to mark the peak and we expect growth to soften in Q4 and into 2018. … …
There are no clear signs yet that Hungary’s economy is overheating but, by the same token, growing signs that the economy is hitting capacity constraints sit uncomfortably with the MPC’s continued dovish rhetoric. Any move to loosen policy, as looks …
18th September 2017
Russian central bank governor, Elvira Nabiullina, struck a predictably cautious tone at today’s postmeeting press conference. But the large amount of spare capacity in the economy is likely to keep inflation lower than the Bank expects, allowing interest …
15th September 2017
Last month’s jump in inflation prompted the Turkish MPC to adopt a more hawkish line in the statement accompanying today’s meeting, at which interest rates were left unchanged. Even so, with inflation set to ease and growth likely to slow, and government …
14th September 2017
Turkey’s economy had a strong Q2 and growth is set to be even quicker in Q3. But that’s likely to mark the peak in the cycle and we think the economy will slow more abruptly than most expect in 2018. Elsewhere, Czech inflation data for August suggest that …
11th September 2017
A sharp pick-up in Turkish industrial production growth in July, which jumped to 14.5% y/y, was always on the cards given the comparison with July last year, when the manufacturing sector was disrupted by the coup attempt. Even so, today’s data suggest …
8th September 2017
Recently-released GDP breakdowns for the economies of Central and Eastern Europe showed that strengthening consumer spending and investment drove the pick-up in aggregate economic growth to a nine-year high in Q2. However, we think that growth is close to …
7th September 2017
The tone of the press statement and conference that followed today’s MPC meeting in Poland remained dovish. However, there is a hawkish minority on the Council and, as core inflation picks up in the coming months, we expect more MPC members to join this …
6th September 2017
The breathless commentary surrounding the recent bailout of Otkritie by Russia’s central bank appears to have missed some of the more salient points about Russia’s banking sector. As we explain in this Watch, the risk of systemic problems that affect even …
Russian inflation fell to a post-communist low of 3.3% y/y in August and we expect the headline rate to remain below the central bank’s 4% target over our forecast horizon. We had thought the Bank would resume its easing cycle at next week’s Board meeting …
5th September 2017
The jump in Turkish inflation last month to 10.7% y/y means that the interest rate cuts we had expected before the end of the year are looking less likely. That said, we still expect the headline inflation rate to fall again later this year as the impact …
Last month’s manufacturing PMIs for Central Europe suggest that economic growth has remained robust in Q3. That said, we think that the third quarter will mark a peak for growth across the region. … Manufacturing PMIs …
1st September 2017
A combination of a strong currency and the fading impact of a previously-introduced levy on the financial sector has kept a lid on Polish core inflation in recent months. These effects should soon fade and we expect core inflation to pick up over the …
31st August 2017
The uncertainty about how troubles at Otkritie might play out initially pushed up interbank interest rates in Russia, but the Central Bank (CBR) quickly snuffed out the rise using its open market operations. The big picture is that the problems facing one …
30th August 2017
This month’s Economic Sentiment Indicators for Central and Eastern Europe suggest that regional growth has remained robust in Q3, at around 4.5% y/y, but also that growth is now peaking. … Economic Sentiment Indicators …
The Russian central bank’s decision to bail out struggling Otkritie bank provides the clearest sign yet of the damaging legacy from the sharp run-up in credit seen up to 2014. That said, the strong balance sheets of the government and central bank mean …
29th August 2017
The big fall in EM inflation is now behind us but it is likely to remain relatively subdued over the coming months. As a result, despite the recent shift in focus towards monetary tightening in advanced economies, we think more EM central banks are likely …
24th August 2017
Turkey’s economy enjoyed a strong first half of the year, but growth is close to peaking and we think that it will slow in 2018-19, and by more than most expect. What’s more, given the vulnerabilities that have built up in the banking sector, the risk is …
23rd August 2017
The raft of second quarter GDP data released over the past few weeks showed that growth in Emerging Europe as a whole accelerated to around 3.7% y/y, its fastest pace since 2011. The pickup in growth was widespread across the region. It’s tempting to pin …
22nd August 2017
The raft of strong Polish activity data for July suggests that the economy grew by around 4.5% y/y at the start of the third quarter. That would be even faster than the rapid rate of expansion seen over the first half of this year. … Poland Industrial …
18th August 2017
Russian activity data for July were a bit softer-than-expected, but overall they suggest that the economy continued to grow by over 2% y/y at the start of Q3. … Russia Activity Data …
17th August 2017
Today’s strong batch of Q2 GDP data from Central and South Eastern Europe support our above-consensus growth forecasts for this year as a whole. Looking ahead, GDP growth is likely to peak in Q3 in most countries, before starting to lose some momentum at …
16th August 2017
Russia’s better-than-expected 2.5% y/y GDP growth recorded in Q2 supports our view that the recovery from the recent recession would surprise many on the upside. We have revised our forecasts, which were already above consensus, up to 2.3% this year and …
11th August 2017
July’s stronger-than-expected Czech inflation data support our view that the National Bank’s monetary tightening cycle will be more aggressive than the markets are pricing in. While our central view is that the next rate hike won’t come until early-2018, …
9th August 2017
We think that natural unemployment rates have fallen by 2.5-3.0%-pts in Central & Eastern Europe over the past decade. Even so, actual rates of unemployment are now significantly below these (lower) natural rates. And, in contrast to many developed …
8th August 2017
Turkish industrial production data was a little weaker than expected in June, but the figures still suggest that GDP growth in Q2 was probably stronger than in the first quarter of the year. … Turkey Industrial Production …
The sharper-than-expected fall in Russian inflation last month means that the central bank, having paused its easing cycle last week, looks set to cut interest rates at next month’s Board meeting. … Russia CPI …
4th August 2017
The statement accompanying the Czech MPC’s meeting, at which it hiked interest rates for the first time in nine years, was relatively dovish and adds to the impression that this will be a gradual tightening cycle. That said, we think inflation is likely …
3rd August 2017
The Polish government’s controversial proposals to reform the judiciary have been met by a backlash both domestically and from the EU. In this Watch, we take a closer look at how the saga could play out and explain why Poland’s current stage in the …
The sharper-than-expected fall in Turkish inflation, to 9.8% y/y last month, from 10.9% y/y in June, is likely to make the central bank more confident that it can reverse the monetary tightening undertaken at the start of the year. … Turkey CPI …
Last month’s manufacturing PMIs for Emerging Europe suggest that the recovery in Russia’s economy continued at the start of Q3, but provided further evidence that growth in the rest of the region weakened a little. … Manufacturing PMIs …
1st August 2017
The surge in Turkish equities earlier this year appears to have been aided by improvements in the real economy, but the more recent rise has been due to global risk appetite. There is scope for further gains over the rest of this year and in 2018, but we …
31st July 2017
The Russian central bank’s decision to pause its easing cycle was motivated by last month’s higher-than-expected inflation outturn. But we expect inflation to fall back to the central bank’s target towards the end of the year and drop below target in …
28th July 2017
This month’s Economic Sentiment Indicators suggest that growth softened a touch in the major economies of Central and Eastern Europe at the start of Q3. But the surveys are still consistent with growth of around 4.0-4.5% y/y in the region as a whole. … …
The tone of the Turkish MPC statement published at today’s meeting remained relatively hawkish, but we think that falling inflation is likely to prompt the Council to start loosening monetary policy later this year and in 2018. … Turkish MPC stands pat, …
27th July 2017
EM inflation fell in June to its lowest rate since the aftermath of the global financial crisis. With the decline in fuel inflation close to bottoming out, we think EM inflation will trough in the coming months. But even so, the big picture is that it is …
The recent loosening of fiscal policy in Turkey seems, in part, to be a justified response to the economic slump following last year’s coup attempt. But any sign that it represents the start of a more fundamental shift away from fiscal orthodoxy would …
26th July 2017
The scale of the decline in inflation in Central Europe over the past month has taken many by surprise and reinforced expectations in the financial markets that monetary policy will remain very loose. However, this fall in inflation was due almost …
Russian activity data for June suggest that the economy grew by 1.5% y/y over Q2 as a whole. That would be the fastest pace of GDP growth since 2013 and supports our view that growth both this year and next will be stronger than most think. … Russia …
19th July 2017
The batch of strong Polish activity data for June suggests that the economy grew by a robust 4% y/y in Q2 – in line with Q1’s outturn. … Poland Industrial Production & Retail Sales …
The change of Romania’s government late last month has prompted a shift in the direction of fiscal policy from loosening to tightening. But the new administration has struggled to put together a legislative agenda and has already backtracked on several …
14th July 2017
The fall in Czech headline inflation last month was the result of weaker fuel inflation, but core inflation appears to have risen further above the central bank’s target. As a result, we think it’s more likely than not that the MPC will raise interest …
12th July 2017
With Turkish inflation now on a downwards path, it seems increasingly likely that the central bank will start to loosen monetary conditions before the year is out. The easing cycle will probably begin slowly, but overall we think the average cost of …
11th July 2017
Despite the slowdown in Turkish industrial production growth in May, it still looks like overall GDP growth may have been stronger in Q2 than it was in Q1. … Turkey Industrial Production …
10th July 2017
The sharp improvement in business and consumer confidence in Hungary – where various survey measures hit record-highs in Q2 – doesn’t appear to reflect a pick-up in actual GDP growth. We think it’s likely that growth remained broadly unchanged in Q2 at …
7th July 2017
The sharper-than-expected rise in Russian inflation last month, to 4.4% y/y, was driven by an increase in fruit and vegetable inflation. Core inflation fell to a record low. Accordingly, we still think it’s more likely than not that the central bank will …
6th July 2017
The recovery in GDP growth in Emerging Europe is close to peaking and, while we expect the region’s largest economy, Russia, to strengthen over the next 12 months or so, that will be more than offset by weakness elsewhere. The cycle in Central and Eastern …
