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Seasonal factors pushed up food inflation in Asia last month, but the underlying picture is that inflation remains below target in commodity-consuming EMs in Asia as well as in Central Europe. In contrast, the lagged effects of currency weakness continue …
29th March 2016
Financial markets across Emerging Europe have recouped some of their earlier losses this month. The Russian ruble has been the region’s star performer, posting the largest gains among all EM currencies over the past month, helped by rising global oil …
The Turkish central bank’s surprise decision to reduce its overnight lending rate by 25bp to 10.5% today was dressed up as a move to simplify the monetary setup, but it appears to be a result of sustained pressure from the government to lower interest …
24th March 2016
Data released over the past month have provided further evidence that regional growth strengthened at the start to the year. Admittedly, the region’s largest economy, Russia, remains in recession. But the slump in output there is clearly easing. Indeed, …
23rd March 2016
Central and Eastern Europe suffered an unusually deep downturn during the global financial crisis, which led to a large rise in underutilised capital and labour. As demand strengthened, firms could then draw on these resources to raise output. However, …
The weak inflation outlook and prospects for slower growth mean Hungary’s easing cycle, which resumed today, has further to run – we anticipate a few more small rate reductions in the coming months. Meanwhile, the Bank became the first EM central bank to …
22nd March 2016
Capital outflows from Russia have slowed markedly in recent quarters and the nature of these outflows has changed too – they are now driven by Russian companies repaying their external debts, rather than by Russian residents buying foreign assets. But …
The improvement in last month’s Russian activity data was flattered by working day effects due to the leap year. But even so, the figures provide further evidence that the economy has passed the worst. … Russia Activity Data …
21st March 2016
The statement by Russia’s central bank following its decision to leave its one-week repo rate unchanged earlier today was decidedly cautious and reinforces our view that any policy easing is only likely to come towards the end of the year. And even then, …
18th March 2016
The slightly weaker-than-expected Polish inflation figure for last month, of -0.8% y/y, may at the margin make interest rate cuts more likely. However, given the restrained comments from last week’s MPC meeting, we think it would take more than this to …
15th March 2016
We expect the economies of Central Europe (Poland, Hungary, Slovakia and the Czech Republic) to perform well over 2016-17. Consumer spending looks set to stay strong, while export sectors will register reasonable rates of growth. Deflation pressures will …
11th March 2016
Turkey’s balance of payments figures for January showed that the current account deficit continued to narrow, although the pace of improvement slowed. The decline in the external shortfall should provide some support to the lira, which adds weight to our …
10th March 2016
The stronger-than-expected rise in Turkish industrial production in January, of 5.6% y/y, supports our view that the economy is set for another year of robust growth. Nonetheless, the underlying vulnerabilities remain and we continue to be concerned about …
8th March 2016
Hungary’s National Bank has radically reorganised its monetary policy framework over the past couple of years, in the process moving away from interest rate cuts and turning to increasingly unorthodox tools to loosen policy. However, these measures have …
7th March 2016
The divided result in Slovakia’s parliamentary election raises the prospect of a period of political uncertainty and, quite possibly, the need for a second election. However, we don’t think this will have a major impact on the economic outlook which, in …
In theory, at least, Russian manufacturing should be among the biggest beneficiaries from a weaker ruble. However, a weak currency alone is unlikely to trigger an industrial turnaround in Russia. While some sectors of industry look well placed to …
4th March 2016
Poland’s Law and Justice Party has had a whirlwind first few months in power and, in this Watch , we look at the policies introduced so far. The short point is that fiscal measures have been more or less as expected and changes on the MPC have been more …
3rd March 2016
The much weaker-than-expected Turkish inflation figure for February, of 8.8% y/y, adds to reasons to think that the central bank will continue to resist hiking interest rates. But the key point is that price pressures remain extremely strong – indeed, …
Last month’s batch of manufacturing PMIs from Emerging Europe was a mixed bag, but overall the surveys suggest that growth in Central Europe continued to hold up well at the start of this year. … Manufacturing PMIs …
1st March 2016
The decline in this month’s Economic Sentiment Indicators (ESIs) for Central and Eastern Europe was disappointing, but the surveys were still strong and point to GDP growth in the region as a whole of close to 4% y/y . Most of the fall in the ESIs came …
26th February 2016
Sharp falls in currencies pushed up inflation in Emerging Europe and Latin America last year. The impact in Emerging Europe has already started to unwind and we expect the same in Latin America before too long. In Emerging Asia, exchange rate movements …
25th February 2016
The Turkish central bank’s decision to keep interest rates unchanged despite the worsening inflation outlook underlines the extent to which political pressures seem to be bearing on the MPC. The Council may be able to get away with this in the current …
23rd February 2016
The latest data from Central and South Eastern Europe (C&SEE) serve as a timely reminder that, despite widespread pessimism, some parts of the emerging world are faring well. Flash Q4 GDP estimates suggest that aggregate growth in C&SEE came in at around …
22nd February 2016
The usual raft of activity data for January showed that, following an awful December, conditions in the Russian economy improved at the start of this year. Encouragingly, there are early signs that falling inflation is starting to ease pressure on …
18th February 2016
January’s batch of Polish activity data paints a worrying picture of the health of the economy at the start of this year, even taking into account distortions due to working-day effects. However, as things stand, there are reasons to think that slower …
17th February 2016
The sharp fall in the ruble over the past year or so has eased some of the pressure on Russia’s government finances but we suspect that structural problems will prevent the wider economy from fully capitalising on potential benefits presented by a weaker …
16th February 2016
The fall in Czech GDP between Q3 and Q4 will take some of the gloss off Emerging Europe’s best performing economy last year. The underlying picture is still strong, but at the margin these data increase the likelihood that the National Bank may ease …
The fall in Polish inflation in January, to a weaker-than-expected -0.7% y/y, appears to be due to a decline in core inflation. Accordingly, these figures raise the risk that the new-look MPC will adopt a more dovish stance at next month’s Council …
12th February 2016
The raft of stronger-than-expected flash Q4 GDP growth figures from Central and South Eastern Europe suggest that the region as a whole grew by close to 4% y/y, its best rate since 2008. These serve as a timely reminder that not all parts of the emerging …
Turkey’s current account deficit widened in December from November, but that was largely due to seasonal factors and the underlying trend is still one of an improving external position. The upshot is that the risk of a sharp sell-off in the lira over the …
11th February 2016
Lower oil prices and a more dovish US Fed have given the Turkish economy a stay of execution and, as a result, we have revised up our GDP growth forecast for this year to 3.0% in 2016 (from 1.5% previously). But the economy’s large vulnerabilities haven’t …
9th February 2016
The stronger-than-expected rise in Turkish industrial production in December, of 4.5% y/y, provides further evidence that GDP growth over Q4 as a whole was robust. We think the economy may have expanded by around 4% y/y. … Turkey Industrial Production …
8th February 2016
The sharp fall in Russian inflation in January can be explained by the fact that the effects of the collapse in the ruble at the end of 2014 and start of 2015 fell out of the annual comparison. However, the respite is likely to be brief. Base effects are …
5th February 2016
The Czech MPC was even more dovish than we had expected at this afternoon’s post-meeting press conference as it not only extended its commitment to keeping the exchange rate ceiling in place to 2017 (as we had suggested might happen), but it also …
4th February 2016
The recent run of weak data, coupled with the latest fall in oil prices, has prompted us to revise our forecasts for Russia. We now expect the economy to contract by 1.3% this year and grow by just 0.5% in 2017, both of which are below the consensus. …
3rd February 2016
Stronger-than-expected Turkish inflation in January, of 9.6% y/y, was partly driven by administered price hikes and what is likely to be a temporary unwinding of the impact of the decline in global oil prices. But even so, underlying price pressures are …
The recent talk of a new wave of privatisation in Russia has attracted much attention, but we suspect that there is less to the proposed plans than meets the eye. While these may temporarily improve the public finances, history suggests that the extent of …
2nd February 2016
January’s manufacturing PMIs for Emerging Europe provided further evidence that the Central European economies made a robust start to the year. Admittedly, the Polish PMI was weak, but there are reasons to think that this may understate the strength of …
1st February 2016
The divergence in EM inflation looks set to persist throughout 2016. In Emerging Asia, Central Europe and parts of the Middle East, low oil prices will help keep inflation muted. But in some of the economies already suffering with elevated inflation, most …
29th January 2016
The Russian central bank kept its benchmark one-week repo rate on hold at 11.00% earlier today, but the markedly more hawkish tone of the accompanying statement makes it clear that rate cuts – which the MPC had hinted at recently – are off the cards. …
January’s Economic Sentiment Indicators for Central and Eastern Europe were surprisingly strong and, on past form, point to growth of over 4% y/y at the start of 2016. These figures highlight that at least some parts of the emerging world weren’t mired in …
28th January 2016
The fresh leg down in oil prices has caused the ruble to tumble, making it one of the worst-performing EM currencies so far this year. Elsewhere, mounting concerns about populist policymaking in Poland have weighed on the zloty. Other currencies in the …
27th January 2016
The latest fall in oil prices and in the ruble since the start of the year has dealt a blow to hopes that Russia’s economy would stabilise in the near future. Fiscal policy is likely to be tightened to counter the hit to the public finances. And the …
26th January 2016
The preliminary estimate of Polish annual 2015 GDP, which showed an expansion of 3.6% over the year as a whole, suggests that growth picked up in Q4. This appears to be due to strengthening investment. … Poland GDP …
Preliminary Russian GDP data, which showed that the economy contracted by 3.7% over 2015 as a whole, are consistent with a drop in GDP of around 3.5% y/y in Q4. Worryingly, December’s activity figures, also released today, showed that activity weakened …
25th January 2016
The stronger-than-expected Polish activity data for December suggest that overall GDP may have expanded by as much as 4% y/y in Q4 of last year. … Polish Ind. Production & Retail Sales …
21st January 2016
The latest drop in the ruble to below 80/$ creates several headaches for policymakers and means that the chances of a cut in interest rates over the next month or so, which were already slim, have now evaporated. … What does the latest fall in the ruble …
20th January 2016
The Turkish central bank’s decision to keep its key interest rates on hold today, despite pressure on the lira and the deteriorating inflation outlook, adds to the impression that monetary policy moves are being swayed by government influence and will …
19th January 2016
There appears to be a great deal of confusion surrounding Russia’s fiscal plans for this year – including a mooted 10% cut in government spending that the cabinet has reportedly agreed this week. In this Update we attempt to set the record straight. Four …
15th January 2016
Polish National Bank Governor Marek Belka used this afternoon’s post-meeting press conference to warn incoming MPC members that there was little to warrant looser monetary policy, but with inflation likely to be weaker than expected, we think the …
14th January 2016
