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The extremely strong batch of Polish activity data for March suggests that the economy may have grown by as much as 4.5% y/y over Q1 as a whole, up from 2.7% y/y in Q4 of last year. This supports our above-consensus 2017 growth forecast. … Poland …
20th April 2017
Turkey’s constitutional referendum last Sunday has resulted in a small bounce in local financial markets, with some of the biggest moves coming in short-term local currency bonds. That could be a sign that markets are starting to anticipate monetary …
18th April 2017
The improvement in the Russian activity data for March confirmed that the slump shown in the February figures was a blip. That said, weakness earlier in the quarter means that year-on-year GDP growth probably slowed over Q1 as a whole. … Russia Activity …
Turkey’s current account deficit remained wide in February, but there are some encouraging signs that the boost to competitiveness from the weak lira may already be having a positive effect. Elsewhere, last month’s softer-than-expected inflation figure …
11th April 2017
The further rise in Czech inflation (both headline and core) last month is, with the koruna cap now at an end, likely to shift attention to the timing of the first interest rate hike. For our part, we think these are likely to occur in 2018. Elsewhere, …
10th April 2017
Russian equities and its currency have fallen following US airstrikes on Syria early this morning, reflecting fading hopes that US-Russia relations will normalise and that sanctions might be lifted. That said, the chances of an end to sanctions already …
7th April 2017
Despite what looks like heavy FX intervention by the Czech National Bank upon the exit from the koruna ceiling policy earlier today, comments from Governor Rusnok suggest that the Bank will tolerate sizeable appreciation of the currency. We are sticking …
6th April 2017
The relatively dovish stance taken by the Polish MPC at today’s post-meeting press conference reinforces our view that monetary tightening is a long way off. We only expect interest rate hikes to come in 2018. While the Romanian MPC also struck a fairly …
5th April 2017
The further decline in Russian inflation last month, and in core inflation in particular, means another interest rate cut looks likely at the next central bank Board meeting later this month. As things stand, we expect another 25bp cut in the benchmark …
The sharp rise in Turkish inflation in recent months has been caused by a combination of the fall in the lira, higher petrol inflation and a harsh winter. The impact of these should fade in the coming months, meaning the headline rate is close to peaking. …
Recent revisions to Russia’s economic data have drawn scorn and generated confusion but, while the country’s statistics are far from perfect, the changes do appear to be a step in the right direction. … Russia’s data revisions: slip-up or …
3rd April 2017
The sharp rise in Turkish inflation last month supports our view that, while the central bank’s tightening cycle has probably run its course, interest rates will stay very high. In better news, March’s manufacturing PMI pointed to a further improvement in …
The Russian economy’s return to positive year-on-year growth in Q4, of 0.3% y/y, was driven by stronger inventory investment and a shallower fall in consumer spending. These trends are likely to continue in the coming quarters and we expect growth to be …
31st March 2017
Russia’s bond market hardly moved in reaction to the central bank’s surprise re-start of its easing cycle last week. However, we think the policy rate will ultimately be lowered much further than markets anticipate, bringing local currency government bond …
Turkish Q4 GDP growth came in at a much stronger-than-expected 3.5% y/y, and has prompted us to revise up our forecast for this year from 1.8% to 2.5%. However, in contrast to the consensus, we don’t expect growth to accelerate in 2018. … Turkey GDP …
We think the next Czech MPC meeting on 4th May is the most likely date for a lifting of the koruna cap, but today’s comments by the Council have raised the risk that it happens outside of a scheduled monetary policy meeting (perhaps as soon as next …
30th March 2017
March’s Economic Sentiment Indicators suggest that, in aggregate, growth in Central and Eastern Europe slowed a touch this month. However, regional growth over Q1 as a whole still appears to have been stronger than in Q4, driven by an improvement in …
The press release accompanying the Hungarian MPC’s meeting earlier today remained dovish, but we think the Council is probably underestimating how quickly inflation will rise in the second half of this year. That could prompt the MPC to unwind its …
28th March 2017
EM inflation fell sharply last month but this was driven almost entirely by a New Year-related drop in food inflation in China. This will reverse in March, meaning aggregate EM inflation is likely to rebound. However, the big picture remains that aside …
27th March 2017
Having cut the one-week repo rate by 25bp earlier in the day, Russia’s central bank governor, Elvira Nabiullina, used her post-meeting press conference to stress that further monetary easing will be gradual. While this suggests that interest rate cuts are …
24th March 2017
The jump in inflation across much of Emerging Europe last month has shifted the focus onto policy tightening. But in most cases this has been a one-off rise from higher fuel inflation, and there is little evidence that a policy response is imminent. While …
23rd March 2017
February’s weak batch of Russian activity data were distorted by working-day effects, and we think the underlying picture is still one of a gradual recovery. … Russia Activity Data …
21st March 2017
The weaker-than-anticipated batch of Polish activity figures for February confirmed our suspicion that January’s extremely strong data couldn’t be sustained. Nonetheless, the big picture is that the Polish economy has made a good start to the year and …
17th March 2017
The jump in speculative inflows to the Czech Republic since the start of the year has increased the likelihood that the central bank will bring forward its planned exit from the koruna cap and that the currency may overshoot its ‘fair value’ once this …
The economies of Emerging Europe have made a good start to the year and we expect growth to pick up further in the coming quarters. The recovery in the region’s largest economy, Russia, is likely to be stronger than most expect. We think that this will be …
The Turkish central bank had good domestic reasons to tighten monetary policy today given growing concerns about inflation. But the Fed’s rate hike last night made their job easier by providing some cover from political pressure from the government to …
16th March 2017
The focus ahead of Turkey’s constitutional referendum, taking place in a month’s time, has been on the political ramifications, but relatively little has been said about the economic impact. Our sense is that a ‘yes’ victory (in favour of the amendments) …
The further rise in Polish inflation last month, to 2.2% y/y, was driven almost entirely by energy and food price movements, while core inflation remained subdued. Accordingly, today’s data are unlikely to prompt a shift in the MPC’s dovish stance. … …
14th March 2017
A higher energy import bill caused Turkey’s current account deficit to widen even further in January, taking it to around 4.2% of GDP. As a result, the lira remains one of the most vulnerable EM currencies to tighter monetary policy in the US. … Turkey …
13th March 2017
Last month’s stronger-than-expected rise in Czech headline inflation was driven entirely by higher food and fuel inflation and, on its own, is unlikely to be of too much concern to the National Bank’s MPC. However, taken together with the large rise in …
9th March 2017
The dovish stance taken by the Polish MPC in its post-meeting press conference reinforces our view that, despite the recent rise in inflation, monetary policy will remain loose over the next couple of years. We think the Council is likely to keep the …
8th March 2017
Stronger-than-expected Turkish industrial production growth in January provides further evidence that the economic recovery from last year’s slump is underway. But even so, we think most analysts are too optimistic on how strong the rebound will be. … …
The recently-released breakdowns of Q4 GDP data in the Central and South Eastern European economies showed that the pick-up in regional growth at the end of last year was driven by an encouraging improvement in exports. But it wasn’t all good news. The …
7th March 2017
The recent rise in the Turkish central bank’s holdings of government debt doesn’t appear to be the backdoor effort to ease monetary policy that some fear. Even so, the concerns this has raised highlight the extent to which the Bank’s credibility has been …
The fall in Russian inflation, which reached a five-year low of 4.6% y/y last month, has further to run and we think the headline rate will reach the central bank’s target by mid-year. Falling inflation should open room for significant rate cuts – we …
The decline in Russian inflation has further to run and we think it will fall below the central bank’s target in the coming months. The central bank has adopted an extremely hawkish posture, but this is likely to change as inflation falls to target. …
6th March 2017
The jump in Turkish inflation last month, to 10.1%, probably marks the peak this year, but the headline rate will remain far above the central bank’s target. Despite the dire inflation outlook, the recovery in the lira since January means that, as things …
3rd March 2017
Last month’s PMIs for Emerging Europe suggest that in aggregate, the region’s manufacturing sector weakened from January, but it remained strong. The surveys from Central Europe were robust and point to industrial production growth of 8-9% y/y in the …
1st March 2017
Russia’s weekly CPI figures have become increasingly misleading, which appears to have resulted in a tendency for forecasters to underestimate how quickly headline inflation would ease. Looking deeper into the data, the inflation slowdown seems to be due …
28th February 2017
EM inflation jumped in January on the back of a rise in fuel price inflation. However, this was driven entirely by base effects stemming from the drop in oil prices at the start of last year. These effects should fade in the coming months meaning that …
In aggregate, February’s Economic Sentiment Indicators for Central and Eastern Europe were a little weaker than in January, but overall they add to the impression that the region’s economies made a strong start to the year. … Economic Sentiment Indicators …
27th February 2017
The Russian ruble and Turkish lira have been among the best performing EM currencies this month, but we don’t think their rallies will be sustained. It seems most likely that the ruble will settle roughly at its current level, and we expect the lira to …
24th February 2017
Russia’s recent recession has opened up a sizeable output gap, one consequence of which is that GDP growth in the next couple of years could be a little stronger than most expect. However, the economy’s medium-term growth prospects are the weakest of any …
23rd February 2017
The latest data suggest that the economies of Emerging Europe got off to a good start to the year. Our regional aggregates of the manufacturing PMIs and the European Commission’s Economic Sentiment Indicators both rose to multi-year highs last month. …
22nd February 2017
The full complement of Russian activity data for January, released today, suggests that the economy probably grew by around 0.3% y/y at the start of this year, which appears to be in line with growth in Q4 of last year. … Russia Activity Data …
Revisions to Russia’s industrial production data, which show that the manufacturing sector’s performance in 2015-16 was much better than previously thought, mean it now looks like the economy returned to positive GDP growth around the middle of last year. …
21st February 2017
The much stronger-than-expected batch of Polish activity figures for January was flattered by working-day effects, but overall the data suggest that the economy may have grown by as much as 3.5% y/y at the start of this year. … Poland Industrial …
17th February 2017
There doesn’t appear to be any strong justification for the 5% appreciation of the ruble against the dollar this month and we think the currency will revert to its historic relationship with global oil prices over the rest of the year. On the basis of our …
16th February 2017
Growth in Central and South Eastern Europe strengthened at the end of last year on the back of an acceleration in Poland and Romania. Nonetheless, we see little in today’s GDP data to change our view that growth across the region will settle at 2.5-3.0% …
14th February 2017
The jump in Polish inflation last month, to 1.8% y/y, was driven almost entirely by energy and food price movements, while core inflation remained flat. Accordingly, we remain of the view that the policy interest rate will remain on hold this year. … …
13th February 2017
