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Exit polls suggest that the opposition Law and Justice won a convincing victory in yesterday’s Polish parliamentary election, which is likely to cement concerns about a shift towards more populist policymaking. There’s a lot of uncertainty about what Law …
26th October 2015
Currencies, equities and bonds in the region’s two largest economies – Russia and Turkey – have posted gains over the past month as oil prices have stabilised and expectations for US rate hikes have been pushed back. Elsewhere, the Polish zloty has lost …
22nd October 2015
The Turkish MPC left its key interest rates unchanged today, but the accompanying press release suggests that the Council may finally have recognised that inflation is set to rise further. This reinforces our view that the Bank will tighten monetary …
21st October 2015
The National Bank of Hungary’s MPC kept its policy interest rate unchanged at 1.35% earlier today, but the Council used the accompanying press release to commit to keeping interest rates on hold at their current historic low into 2017. This is in line …
20th October 2015
September’s activity data from Russia suggest that while the downturn in industry seems to have bottomed out, the slump in consumer spending has deepened. Retail sales are now falling at their sharpest pace since 1999. … Russia Retail Sales, Inv. & IP …
19th October 2015
Rising support for the opposition Law and Justice party ahead of Poland’s parliamentary election on 25th October has raised concerns about a move towards more populist policymaking. We think that any impact on the economy’s near-term outlook from such a …
16th October 2015
Turkey’s balance of payments data for August were, on the face of it, encouraging as the current account deficit fell to its lowest monthly level since 2009. But it’s worth noting that the decline in the external shortfall was driven by a drop in …
14th October 2015
Czech inflation came in at a slightly stronger-than-expected 0.4% y/y last month, as an easing of the decline in food prices more than offset a steeper decline in fuel prices. The bigger picture, however, is that inflation remains subdued and is likely to …
9th October 2015
The IMF has put the vulnerabilities in the Turkish banking sector – which we have been warning about for several years – back into the spotlight. So far, there have been remarkably few signs of stress in the sector. But given the scale and structure of …
8th October 2015
The larger-than-expected rise in Turkish industrial production in August was encouraging, although given the more recent declines in business confidence, it’s not clear whether this will be sustained. Elsewhere, the sharper-than-expected decline in …
Having left the policy interest rate on hold at 1.5% earlier today, the Polish MPC sounded relatively cautious about the downside risks to the inflation outlook. The Council doesn’t seem to be in the mood to lower interest rates – and the markets may have …
6th October 2015
The small decline in Russian inflation last month, to 15.7% y/y, was reassuring in light of the fresh fall in the ruble. But even so, inflation remains extremely high and against this backdrop there is little room for the central bank to lower interest …
5th October 2015
The rise in Turkish inflation to a stronger-than-expected 7.9% y/y last month provides further evidence that the latest plunge in the lira is hurting the economy. This reinforces our view that the central bank will tighten monetary conditions over the …
The Volkswagen (VW) emissions scandal has led to growing concerns in Central Europe that, because of the company’s large presence in the region, there could be a heavy economic toll. However, as we explain in this Watch , while there may be a near-term …
2nd October 2015
The fall in the ruble has led to a sharp increase in the foreign currency debt burden for Russian companies. The risks are mitigated to some extent by the fact that the debt is concentrated among large public companies which, given their importance, are …
Last month’s manufacturing PMIs for Emerging Europe brought mixed news. Activity in Central Europe appears to have held up reasonably well, and the surveys suggest that the slump in the Russian economy has bottomed out. But the PMIs provide further …
1st October 2015
Having left interest rates unchanged earlier today, the Romanian MPC once again used the accompanying press conference to warn that looser fiscal policy could lead to stronger inflation pressures. But it’s clear that the Council will wait for more …
30th September 2015
Ukraine’s debt-restructuring deal has led to a rally in the country’s bond market and eased pressure on the hryvnia . Meanwhile, although most of the region’s equity markets have fallen over the past month, they have avoided the large losses seen in …
29th September 2015
The declines in this month’s Economic Sentiment Indicators across much of Central and Eastern Europe were disappointing, particularly in light of the relatively impressive reading from Germany. But overall the surveys still point to strong regional GDP …
While inflation in the EM world is low on average, there are big divergences. In particular, many of the economies already struggling with high inflation are also those that have seen their currencies fall sharply recently, which suggests their inflation …
28th September 2015
There are few signs that Europe’s migrant crisis has had much economic impact on Central Eastern Europe (CEE). However, if recent border controls were to become a permanent fixture, the region could be affected via disruptions to manufacturing supply …
Credit conditions in Russia have tightened substantially over the past six months or so, with households and SMEs being particularly hard hit. We don’t expect a significant turnaround anytime soon. Non-performing loans are set to rise further over the …
25th September 2015
Having left monetary policy unchanged earlier today, the Czech MPC struck a dovish note at this afternoon’s press conference, although it looks like the strength of the latest economic data prevented this rhetoric from being matched with action. We expect …
24th September 2015
Emerging Europe remains a region of two halves. Its two largest economies – Russia and Turkey – will continue to struggle over the coming years as cyclical downturns compound long-standing structural problems. Our forecasts for both economies are below …
23rd September 2015
The Russian ruble and Turkish lira have been among the hardest hit EM currencies this quarter and this has already started to feed through into the real economy. Inflation is on the rise (again), extending the squeeze on consumers. And central banks have …
22nd September 2015
The Turkish central bank left its official interest rates on hold today, but tweaks to its policy framework and to the accompanying statement suggest that the MPC is (slowly) taking a more hawkish line. Last week’s decision by the Fed to stand pat …
Rosstat’s monthly raft of activity data showed that the Russian economy continued to contract in August at a pace of around 4.5-5.0% y/y. However, the figures provide the first signs that the pace at which output is falling may have started to ease. … …
17th September 2015
August’s Polish activity data were generally a little weaker-than-expected, but even so it looks like the economy continued to grow at a robust pace of around 3.5% y/y in Q3. At the margin, these data may temper the views of the one or two hawks on the …
Deflation in Poland eased a little last month as a fall in energy inflation was more than offset by strengthening food inflation. We expect the headline rate to return to positive territory in the final quarter of the year, as the impact of last year’s …
15th September 2015
Today’s decision by the Russian central bank to keep interest rates on hold at 11.00% having cut rates at each of its previous meetings this year, clearly reflects policymakers’ concerns about the recent weakness of the ruble and the impact this will have …
11th September 2015
The sharp pick-up in Turkish GDP growth in Q2, to 3.8% y/y, provides some rare good news for the economy. However, we think this is likely to be temporary and higher inflation and tighter monetary policy will cause growth to weaken again over the coming …
10th September 2015
With the Russian economy in a deep recession, the fact that the unemployment rate has remained at historic lows is puzzling. As we explain in this Watch , one explanation may be that large firms – which are by far the biggest employers in Russia – have …
9th September 2015
The fall in Czech inflation in August, to 0.3% y/y, was driven largely by steeper falls in food and energy prices and, as a result, shouldn’t raise too many concerns about the risk of deflation. Nonetheless, today’s CPI figure adds to the reasons to think …
The sharper-than-expected slowdown in Turkish industrial production in July, coming alongside the fall in August’s manufacturing PMI, reinforces our view that GDP growth is likely to weaken in the coming quarters. Elsewhere, the fall in inflation in …
8th September 2015
The rise in Russian inflation in August, to 15.8% y/y, seems to have been driven by the impact of the fall in the ruble. Against this backdrop, the central bank looks likely to keep its benchmark one-week repo rate unchanged at 11.0% next week. … Russia …
4th September 2015
The rise in Turkish inflation, to 7.1% y/y last month, provided the first hard evidence that the latest fall in the lira has started to push up price pressures. We expect inflation to rise further over the next six months and, against this backdrop, it …
3rd September 2015
Having left its benchmark interest rate unchanged at 1.50% earlier today, the Polish MPC struck a relatively dovish note at the post-meeting press conference, reinforcing our view that monetary policy is likely to remain loose for longer than most expect. …
2nd September 2015
August’s manufacturing PMIs for Emerging Europe were generally weak, with almost all the headline figures dropping from July. The decline in the Polish survey was the most disappointing of the lot, but we would note that the sharp fall in this PMI stands …
1st September 2015
The recent bout of currency weakness is likely to add to inflation concerns in EMs that have either seen their currencies fall a long way or have limited spare capacity in their economies (mainly Latin America but also Turkey). However, in EMs where …
31st August 2015
Economic Sentiment Indicators strengthened in most countries across Emerging Europe this month, suggesting that the region continued to grow at a healthy pace in the third quarter. … Economic Sentiment Indicators …
28th August 2015
Following months of difficult negotiations Ukraine has finally managed to agree on a debt restructuring deal with its creditors. But the deal itself is too small to make much of a dent in Ukraine’s debt-to-GDP ratio. What Ukraine really needs in order to …
27th August 2015
Central European bonds and currencies have been remarkably resilient during the recent turmoil in the global financial markets. In contrast, Turkish markets have been hit by fresh concerns about the political situation and a general spike in investor risk …
25th August 2015
The latest plunge in global oil prices and the associated depreciation of the ruble have added to what was already a bleak picture for the Russian economy and reinforce our view that this year’s recession will be deeper than most expect. … What does the …
24th August 2015
The raft of Russian activity data for July, released today, showed that the economy continued to contract by 4-5% y/y at the start of Q3. And the latest drop in oil prices means that the fall in output in Q3 as a whole is likely to be just as deep as in …
19th August 2015
The raft of Polish activity data for July were slightly disappointing, but we don’t think this marks the start of a more serious downturn. Indeed, it still looks like the economy was growing by around 3% y/y at the start of the third quarter. … Polish …
The Turkish central bank (CBRT) kept its benchmark rates on hold today, but the accompanying statement struck a hawkish note in response to the latest fall in the lira. In addition, the Bank’s accompanying publication of its road map for monetary policy …
18th August 2015
Flash Q2 GDP data from Central and South Eastern Europe serve as a reminder that it’s not all doom and gloom for the emerging world. GDP in the region as a whole grew by a robust 3.5% y/y. The Czech Republic was the region’s star performer, and is now one …
14th August 2015
Markets have reacted negatively to news that coalition negotiations between the two largest parties in Turkey have broken down and that fresh elections are now highly likely. While we don’t think things are that bad – indeed, the very latest fall in the …
13th August 2015
The Polish economy remained in deflation in July, with consumer prices falling by 0.7% y/y, and the latest drop in oil prices may have pushed inflation deeper into negative territory this month. Even so, we don’t think policymakers will be overly …
Turkey’s current account deficit narrowed in dollar terms in June, but only because imports dropped by more than exports. Moreover, the financing of the deficit remains a source of vulnerability. Elsewhere, although inflation in Hungary came in at a …
11th August 2015
