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The further rise in Czech inflation last month, to 2.2% y/y, reinforces our view that the koruna cap will be removed in the coming months. We see the MPC meeting on 4th May as the most likely date for the policy shift. … Czech CPI …
10th February 2017
The dovish tone of the Polish MPC’s post-meeting press conference this afternoon reinforces our view that the policy interest rate will be kept at its current historic low of 1.50% throughout 2017-18. This stands in contrast to the markets, which are …
8th February 2017
Weaker-than-expected growth in Turkish industrial production in December, of 1.3% y/y, supports our view that the recovery from Q3’s downturn will be sluggish. It looks like the economy may have grown by around 1.5% y/y over Q4 as a whole. … Turkey …
The fairly hawkish post-meeting press conference and upwards revisions to the central bank’s inflation forecasts suggest that the Romanian MPC is increasingly concerned about the prospect of loose fiscal policy feeding into stronger core price pressures. …
7th February 2017
The further fall in Russian inflation last month, to 5.0% y/y, supports our view that, despite the central bank’s recent hawkish rhetoric, interest rates will be lowered substantially this year. … Russia CPI …
6th February 2017
The hawkish statement by the Central Bank of Russia that accompanied today’s decision to leave the policy rate on hold has prompted us to revise up our end-year interest rate forecast (to 8.25%, previously 7.50%). Nonetheless, we still think inflation …
3rd February 2017
The sharp rise in Turkish inflation last month, to 9.2% y/y, was due largely to higher petrol and food inflation. The impact of the weaker lira on core inflation has been surprisingly muted so far. At the margin, today’s data make it more likely that the …
The upwards revisions to the Czech National Bank’s inflation forecasts and the relatively hawkish post-meeting press conference reinforce our view that the Council’s koruna cap policy will end fairly soon. We think that the MPC meeting on 4th May is the …
2nd February 2017
Russia’s new “fiscal rule”, which takes effect this week, is unusual insofar as it governs how the budget deficit is financed, rather than anchoring either the size of the deficit or the scale of government expenditure to oil prices (as is more normal). …
1st February 2017
The preliminary estimate of Russian 2016 GDP, which showed a small contraction of 0.2% over the year as a whole, was a bit better than expected and is consistent with the idea that the economy returned to positive growth in the final quarter of last year. …
Last month’s PMIs for Emerging Europe indicate that the region’s manufacturing sectors made an impressive start to the year. The surveys suggest that industrial production growth in Central Europe could pick up to 8% y/y in the coming months, from a …
The sharp fall in the Turkish lira already this year, and the disappointing response by the central bank, have prompted us to revise our currency forecast down. We now see it ending the year at 4.00/$ (previously 3.75/$) and 2018 at 4.25/$ (4.00/$ …
31st January 2017
The large upwards revisions to Turkey’s investment rate don’t mean the economy’s growth prospects are now much stronger. The changes mainly appear to reflect the country’s residential property boom being captured more accurately. Accordingly, we still …
January’s Economic Sentiment Indicators in Central and Eastern Europe suggest that most economies in the region made a strong start to this year. In particular, today’s data support our view that growth in both Poland and Hungary will be faster this year …
30th January 2017
A pick-up in fuel price inflation is set to push up headline inflation in many EMs over the coming months. But this is not true across the board. In some countries, including Brazil and Russia, any pick-up in fuel inflation looks likely to be more than …
26th January 2017
Russia’s construction and retail sectors suffered a fresh slump in December but, overall, it looks like the economy expanded in year-on-year terms in Q4 (by around 0.3%) for the first time since 2014. … Russia Activity Data …
25th January 2017
The Hungarian MPC kept its policy interest rate unchanged earlier today and the accompanying statement remained dovish in spite of a jump in inflation at the end of 2016. Looking ahead, with growth set to fall short of the central bank’s lofty …
24th January 2017
Today’s interest rate hike by the Turkish central bank was just large enough to buy support for the lira, but we think further hikes in the key policy rates will, ultimately, be needed in the coming months. Moreover, there were worrying signs that the MPC …
The sharp fall in the Turkish lira has forced the central bank to tinker with its monetary policy setup in an effort to shore up the currency, and we think hikes in key policy interest rates loom. Earlier this month, the Bank lowered reserve requirement …
We think it is most likely that the Czech MPC will remove the koruna ceiling at its meeting on 4th May. Following this, we are forecasting that the koruna will appreciate to 25.5/€ from 27/€ at present. … Czech koruna: when will cap be lifted and how far …
19th January 2017
Polish activity data for December suggest that GDP growth over Q4 as a whole came in at 2.3% y/y, down a touch from 2.5% y/y in Q3. … Poland Industrial Production & Retail Sales …
Higher oil prices led to sharp rises in inflation across Central and Eastern Europe (CEE) at the end of 2016, and this has further to run in the next few months. All in all, oil prices are likely to push headline rates up by 0.8%-pt on average by March, …
16th January 2017
Dovish comments by Polish National Bank Governor, Adam Glapinski, at this afternoon’s post-meeting conference suggest that the MPC is as focused on growth as it is on inflation. We continue to think that growth is unlikely to strengthen as much as the …
11th January 2017
The plunge in the lira doesn’t, so far, appear to have resulted in significant balance sheet strains, but the rapid rise in private sector FX liabilities suggests that this is still a risk. At the very least, it adds to the reasons to expect the economy …
On past form, the latest fall in the Turkish lira appears to be sufficiently large to trigger an interest rate hike at this month’s MPC meeting. If the Council doesn’t act, that will only reinforce concerns about central bank independence and might force …
9th January 2017
The smaller-than-expected rise in Turkish industrial production in November reinforces the picture that while the economy probably returned to positive growth at the end of last year, the recovery will be sluggish. … Turkey Industrial Production …
The accompanying statement to today’s MPC meeting in Romania was less hawkish than we had expected. Nonetheless, with further fiscal stimulus in the pipeline and economic slack now exhausted, inflation is likely to rise sharply over the coming months. …
6th January 2017
The batch of relatively strong Economic Sentiment Indicators across Central and Eastern Europe in December suggests that, after a disappointing third quarter, GDP growth in the region recovered in Q4. … Economic Sentiment Indicators …
The surprisingly sharp rise in Turkish inflation in December, to 8.5% y/y, was due mainly to a jump in food and energy inflation, although the weakness of the lira is also feeding through into higher core inflation. The headline rate is likely to peak in …
3rd January 2017
Despite mounting speculation that the Czech MPC would hint at removing the koruna cap earlier than previously suggested, today’s MPC press statement was surprisingly dovish. We remain of the view that the cap is most likely to be lifted in mid-2017. And …
22nd December 2016
The press release accompanying the Hungarian MPC’s meeting earlier today suggests that the Council thinks the need for additional monetary easing has diminished. As a result, we have taken the very modest policy easing that we had previously expected out …
20th December 2016
Inflation is set to rise in most emerging economies in 2017 as the drag from lower oil prices continues to unwind. Even so, with underlying price pressures in check, the jump in fuel inflation is unlikely to push headline inflation above central banks’ …
The health of banking sectors in Central and South Eastern Europe (C&SEE) has improved significantly in recent years. And they are now much less exposed to a fresh eruption of financial stress in the euro-zone than they were a few years ago. In contrast, …
The rise in oil prices following the agreement by OPEC and other oil producers to cut output has helped Russian equities and the ruble to outperform for the second consecutive month. Elsewhere, Polish equities have also fared well over the past month and …
19th December 2016
November’s relatively strong Russian activity data were flattered by working-day effects, but they still suggest that the economy is nearing a return to positive growth. Elsewhere, a healthy batch of Polish activity figures for the same month suggests …
The Russian central bank’s post-meeting press conference provided the firmest signs yet that the easing cycle will resume next year. Governor Nabiullina’s comment that Q2 was the most likely time for this suggests that the initial rate cut may come a …
16th December 2016
Most economies in Emerging Europe enjoyed a strong first half of 2016, but regional growth has slowed sharply over the second half of the year. Q3 GDP data showed that the Turkish economy suffered an outright fall in output, due in large part to the …
15th December 2016
Today’s news that Donald Trump has nominated Rex Tillerson to be Secretary of State has clearly increased the chances that US sanctions on Russia will be lifted in the coming years. Were that to happen, it would provide a boost to the Russian economy and …
13th December 2016
The much-sharper-than-expected 1.8% y/y contraction in Turkish GDP in Q3 probably marks the low point of the economy’s coup-induced slump. Nonetheless, the data reinforce our view that most analysts are far too optimistic on the outlook. Revisions to the …
12th December 2016
Our Tracker shows that total capital outflows from the emerging world reached a ten-month high of $75bn last month. This was driven mainly by an acceleration in outflows from China, but it seems that Donald Trump’s election victory has also triggered a …
9th December 2016
The Russian government’s sale of part of its stake in Rosneft to the Qatar Investment Authority and Glencore late yesterday has raised questions about what the deal means for sanctions, the currency and the fiscal positon. In this Update, we answer three …
8th December 2016
Comments by Polish National Bank Governor, Adam Glapinski, at this afternoon’s post-meeting conference support our view that interest rates will be left unchanged next year, not hiked as the markets are pricing in. Moreover, with GDP growth likely to …
7th December 2016
The recently-released breakdowns of Q3 GDP data for Central and South Eastern Europe showed that most major expenditure components weakened, although there was still some encouraging news at a country level. In particular, huge slumps in investment are …
6th December 2016
The further fall in Russian inflation last month, to 5.8% y/y, won’t be enough to prompt the central bank to resume its easing cycle at the rate-setting meeting next week. Nonetheless, we think the decline in inflation will continue into 2017, ultimately …
The volatility in oil prices over the past couple of months has prompted clients to ask us how higher and lower oil prices could affect the outlook for Russia’s economy. In this Focus, we use several scenarios to illustrate this. … What higher and lower …
The surprise fall in Turkish inflation in November means that, at the margin, it looks less likely that the MPC will follow up last month’s interest rate hike with another this month. Nonetheless, with the recent weakness of the lira yet to fully feed …
5th December 2016
Last month’s PMIs for Emerging Europe suggest that growth in the region’s manufacturing sector strengthened between Q3 and Q4. At a country level, the surveys suggest that Russia’s recovery is gathering a little pace. But in Turkey, the PMI indicates that …
1st December 2016
Hopes that Donald Trump’s election victory will bring about the end of economic and financial sanctions on Russia caused the country’s financial markets to outperform those in other emerging markets this month. However, we think Russian markets may have …
30th November 2016
The risks posed by Turkey’s heavy dependence on foreign capital inflows came to a head this month, with the lira falling the furthest of any EM currency in November. This has been driven in part by Donald Trump’s surprise election victory – his fiscal …
Inflation in most commodity-producing EMs will continue to edge down over the coming months as the effects of previous currency falls unwind. This will allow policymakers in almost all of these countries to loosen monetary conditions. … Inflation in EM …
