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The Russian central bank cut its one-week repo rate by 100bp, to 11.5%, at today’s MPC meeting, but struck a more cautious note on the near-term outlook for inflation. As a result, while we expect interest rates to be lowered further over the rest of this …
15th June 2015
The clock is ticking for Greece to unlock much-needed funding and stay in the euro-zone. And if it fails and were to leave the single currency, the impact of this wouldn’t be felt in Greece alone. In this Watch , we explain that while Eastern Europe’s …
11th June 2015
Even though Turkey’s current account deficit narrowed in April, the bigger picture is that it remains large. And the composition of external financing is a key vulnerability, with foreign direct investment now only covering a tenth of the shortfall. … …
We wouldn’t get carried away by the better-than-expected 2.3% y/y rise in Turkish GDP in Q1. This stronger outturn was caused by a sharp pick-up in consumer spending, which came at the cost of a lower domestic savings rate and a wider current account …
10th June 2015
The Turkish lira has stabilised today, but it remains vulnerable to further weakness. Faced with another leg down, we think the central bank might in the first instance lower the FX depo rate or scale up FX sales. But in the event of a sharp sell-off, …
9th June 2015
Stronger-than-expected inflation figures for last month in both the Czech Republic and Hungary will remove any lingering concerns about deflation. However, large amounts of spare capacity will keep inflation low over the coming 18 months or so, allowing …
The market’s reaction to Sunday’s inconclusive Turkish parliamentary election was overwhelming negative. In this Update , we outline three scenarios to show how the political situation might develop. … After the election: what next for Turkish …
8th June 2015
The loss by Turkey’s AK Party of its parliamentary majority for the first time since 2002 makes President Erdogan’s desire to change the constitution to strengthen the presidency a pipe dream and should in time help to dampen concerns about an …
Emerging Europe’s economy is likely to contract this year for the first time since 2009, but prospects differ substantially across the region. In Russia, while financial strains have eased, the outlook for the real economy remains bleak. Meanwhile, Turkey …
5th June 2015
The drop in Russian inflation to 15.8% y/y in May confirms that it has now passed its peak. We expect inflation to ease slowly over the next three to six months before falling sharply around the turn of the year. … Russia CPI …
4th June 2015
The Polish MPC’s press release, which followed the decision to leave interest rates unchanged earlier today, suggested that the Council is slightly more upbeat on the economy’s growth prospects and even less concerned about deflation than last month. But …
3rd June 2015
The rise in Turkish inflation in May, to 8.1% y/y, was driven by a pick-up in core price pressures and provides further evidence that the economy’s inflation problems are escalating. Elsewhere, Hungary’s retail sales figures for April suggest that, while …
Fears ahead of Turkey’s parliamentary election on 7th June have centred on the risk of a dominant and increasingly authoritarian AK Party under President Erdogan , but in another twist to the plot the latest opinion polls suggest that the election might …
1st June 2015
May’s batch of manufacturing PMI data for Emerging Europe provided further evidence that the slump in the Russian economy has deepened in the second quarter. But the surveys finally brought some positive economic news for Turkey’s President Erdogan ahead …
Financial markets in Emerging Europe have generally performed poorly over the past month, with equities having dropped back and the region’s bonds having been hit by the sell-off in developed economies’ debt markets. The Turkish lira has strengthened over …
28th May 2015
May’s Economic Sentiment Indicators (ESIs) for Eastern Europe were a mixed bag, but overall the surveys still point to strong growth. There were few signs that the unfolding problems in Greece have had any impact on confidence in the region. … Economic …
The slump in activity data for April put an end to hopes raised in some parts of the government (and markets) that the worst is over for the Russian economy. The steep falls in output are likely to be concentrated in the first half of the year, but there …
27th May 2015
The big drag on EM inflation from the drop in commodity prices over the second half of last year will ease over the coming months. With inflation set to rise in most EMs over the second half of this year, the bulk of policy easing across the emerging …
This report is only available as a PDF. Click to download. … Window for further Hungarian rate cuts is closing …
26th May 2015
Victory for Andrzej Duda of the Law and Justice Party in Sunday’s Polish presidential election has raised concerns about a shift towards more populist policymaking and taken some of the shine off Emerging Europe’s best growth story. This doesn’t mean that …
Today’s raft of activity data suggests that the slump in Russia’s economy deepened further at the start of Q2. Output appears to have fallen by about 4.0% y/y in April. This should dash any remaining hopes for a swift recovery in Russia. … Russia Retail …
22nd May 2015
The raft of preliminary first quarter GDP data showed that, in contrast to most of the emerging world, growth in Central Europe strengthened. This came on the back of easing fiscal austerity, looser monetary conditions and, most noticeably, the windfall …
21st May 2015
The weakness of last month’s Polish industrial production and retail sales figures was disappointing, but the impact on overall GDP growth seems to have been partially offset by an improvement in the construction sector. At the margin, these data may …
20th May 2015
The press release accompanying today’s Turkish MPC meeting, at which interest rates were left unchanged, suggests that policymakers are increasingly concerned about the inflation outlook. But we still think the Council is failing to acknowledge the full …
The latest developments regarding Ukraine’s debt restructuring, including a law passed by parliament today which allows the government to renege on payments if needed, are themselves of little significance. But they do indicate that both parties are …
19th May 2015
The best that can be said about Q1 GDP data from Russia is that the economy has avoided outright collapse and is, instead, merely on the cusp of recession. Although financial market conditions have stabilised in recent months, key vulnerabilities remain …
15th May 2015
First quarter GDP data from Poland and the Czech Republic add to evidence suggesting that, while most other EMs have slowed since the start of this year, those in Central Europe have strengthened. … Czech Republic & Poland GDP …
April’s Polish CPI data, which showed that consumer prices fell by 1.1% y/y compared with a drop of 1.5% y/y in March, should ease lingering concerns that deflation might become entrenched. But today’s data are unlikely to have much impact on monetary …
14th May 2015
We have been warning about the deep-rooted drivers of Turkish inflation for some time, and it now looks like energy prices will compound the problem by pushing the headline rate even further above the central bank’s target. In these circumstances, most …
13th May 2015
The stronger-than-expected preliminary first quarter GDP estimates out of Hungary, Romania and Slovakia are particularly encouraging in light of the slowdown in the German economy. All in all, the data reinforce our view that Central and South Eastern …
Turkey’s higher-than-expected current account deficit figure for March provides further evidence that weak exports have almost entirely offset the benefit to the economy from lower oil prices. And the funding of the deficit remains a concern, with direct …
12th May 2015
The raft of preliminary first quarter GDP data set to be released this week across Emerging Europe should confirm that the Russian economy fell into recession, but that growth in Central Europe was relatively strong, in spite of headwinds from Russia and …
11th May 2015
The stronger-than-expected 4.7% y/y rise in Turkish industrial production in March provides much-needed good news for President Erdogan ahead of next month’s election. But even so, growth in industry over the first quarter as a whole was weak and leading …
8th May 2015
The press release accompanying the Czech National Bank’s MPC meeting, at which the policy rate and the exchange rate ceiling were left unchanged, was dovish but less so than in March. As a result, while we expect monetary conditions to remain very loose, …
7th May 2015
March’s industrial production data from the Czech Republic and Hungary show that both economies ended the first quarter on a strong note. Indeed, these data, put together with the latest retail sales figures, are consistent with GDP growth of more than 3% …
Having left interest rates unchanged earlier today, the Polish MPC struck a dovish note at this afternoon’s press conference in an effort to temper the market’s expectations for interest rate hikes. For our part, we expect the policy rate to remain …
6th May 2015
The fall in Russian inflation last month, to 16.4% y/y, suggests that it has passed its peak. As the effects of last year’s fall in the ruble unwind, we expect inflation to ease gradually over the coming months. That said, it still looks set to remain in …
April’s raft of manufacturing PMIs in Emerging Europe, released today and yesterday, suggest that conditions in the Russian and Turkish industrial sectors improved a little at the start of the second quarter. But activity is still extremely weak. …
5th May 2015
Most of the recent slowdown in inflation across the emerging world has been the result of the weakness in food and fuel inflation. Meanwhile, core inflation is barely any lower than a couple of years ago. This serves as yet another indication of the fact …
29th April 2015
The rise in April’s Economic Sentiment Indicators (ESIs) across most of Central and South Eastern Europe was encouraging, particularly in light of the drop in the corresponding figure for the euro-zone. The breakdown of the surveys provides further …
The region’s two largest economies – Russia and Turkey – have continued to struggle over the past month. Russia’s economy appears to have contracted sharply by around 3% y/y in Q1. Meanwhile, we estimate that growth in Turkey slowed to a sluggish 1.5% y/y …
27th April 2015
The European Commission today charged Gazprom with abusing its dominant position in Eastern Europe’s gas market. In this Update , we answer five key questions about the decision and the implications for both Russia and the rest of Emerging Europe. … The …
22nd April 2015
The Turkish central bank left its official interest rates unchanged today, but managed to make its monetary policy framework even more complex by tweaking a few obscure tools in an effort to release foreign currency liquidity and shore up the lira. The …
The communiqué accompanying today’s decision by the Hungarian National Bank to cut its two-week deposit rate by 15bp, to 1.80%, was very similar to last month’s and clearly indicated that another small rate cut is likely at the next MPC meeting in May. …
21st April 2015
The raft of strong Polish activity data for March was flattered by calendar effects but, even so, the economy clearly ended the first quarter of the year on a strong note. All in all, it looks like GDP grew by a little more than 3% y/y in Q1. … Polish …
20th April 2015
Today’s raft of activity data for March is consistent with Russia’s economy having contracted by around 3% y/y in the first quarter of this year. Although financial markets have rallied over the past few weeks, the weakness of activity data is at odds …
17th April 2015
There is a growing debate in Turkey about what lies behind the strength of inflation, but we think this discussion has overlooked the absence of spare capacity. Without structural reforms to address this, the economy is likely to remain stuck in a rut of …
The most convincing explanation for the recent rally in the ruble is the fact that the strains in Russia’s balance of payments have eased since the start of the year. Nonetheless, they haven’t gone away completely, and the big picture is still that of an …
15th April 2015
Having left the policy interest rate unchanged at 1.5% earlier today, the Polish National Bank’s governor, Marek Belka , dismissed suggestions that the strengthening zloty and March’s weaker-than-expected inflation data might lead to additional rate …
