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Following a torrid few years after the global financial crisis, Central European consumer spending has started to recover gradually over the last eighteen months and there are reasons to expect this to continue over the coming years. As a result, …
14th April 2015
The decision taken by the Hungarian government to ban Sunday trading is unlikely to have a major impact on the economy at an aggregate level. But as we explain in this Watch , it may lead to a shift in spending patterns. And more importantly, it is likely …
9th April 2015
The small rise in Czech inflation last month, to 0.2% y/y, slightly reduces the probability that the National Bank will ease monetary conditions further at next month’s MPC meeting. Nonetheless, with core inflation at just zero, we continue to think it’s …
The assumptions underpinning Russia’s 2015 budget, currently working its way through parliament, look realistic, suggesting that the government is finally starting to wake up to the extent of the economy’s problems. Nonetheless, a substantial fiscal …
8th April 2015
Turkish financial markets are becoming increasingly worried about what lies in store after June’s parliamentary election, with fears focusing on the risk of rising authoritarianism under President Erdogan and the ruling AK Party. In this Focus , we …
The slump in Russia’s economy has been spreading unevenly across various sectors with consumers bearing the brunt of the economy’s problems. By contrast, the hit to the manufacturing sector has so far been smaller. And we think this trend is likely to …
3rd April 2015
March’s manufacturing PMIs in Emerging Europe were something of a mixed bag, with the figures providing further evidence that the Turkish and Russian economies weakened, although in the latter manufacturers don’t seem to be faring as badly as some had …
2nd April 2015
The Turkish economy grew by a stronger-than-expected 2.6% y/y in Q4, driven by an uptick in consumer spending. But more timely activity data suggest that this improvement was short-lived, with growth slowing to around 1-1.5% y/y in Q1. … Turkey GDP …
1st April 2015
A pick-up in inflation in all four of BRIC economies pushed aggregate EM inflation to an eight-month high last month. However, the bigger picture remains that in most EMs inflation is both low and stable. … BRICs drive pick-up in EM …
31st March 2015
The declines in March’s Economic Sentiment Indicators (ESIs) in Central and South Eastern Europe were disappointing, but the surveys still point to strong growth in the region. Looking at the breakdown of the indicators, there was a welcome improvement in …
Having kept its two-week repo rate unchanged at 0.05% and maintained its exchange rate ceiling of 27/€ earlier today, the Czech MPC’s accompanying statement struck a markedly dovish note. As a result, we are sticking to our forecast that monetary …
26th March 2015
Despite concerns about deflation, a recession in Russia and sluggishness in the euro-zone, the latest data out of Central Europe have been surprisingly robust. Industrial production growth has accelerated in recent months and retail sales are rising at …
25th March 2015
Having resumed its easing cycle earlier today, the Hungarian MPC made it clear that a few more small rate cuts are likely over the coming months. For now, we have pencilled in 30bp of rate cuts, which would bring the benchmark rate to 1.65% by the end of …
24th March 2015
The Polish MPC was uncharacteristically forthright in its statement that today’s 50bp cut in the policyinterest rate, to 1.5%, marked the end of the easing cycle. But it’s clear that weak price pressures willremain a concern for some time to come. As a …
Because Russia’s export gas price seems to follow oil prices with a six to nine month lag, the recent fall in oil prices has not yet fully fed into Russia’s gas export earnings. Admittedly, gas exports are much less important for Russia than exports of …
20th March 2015
Working day effects exacerbated the weakness in February’s activity data from Russia but don’t change the bigger picture of an economy sliding deeper into recession. Consumers are still bearing the brunt of the slowdown, although there are early signs …
19th March 2015
Poland’s industrial production and retail sales data for February suggest that the economy grew by a solid 3% y/y or so last month. As a result, even though the economy fell further into deflation, the MPC seems likely to stick to its pledge to leave …
18th March 2015
The start of debt restructuring negotiations in Ukraine has been accompanied by further losses on the country’s foreign currency government bonds. Meanwhile, currencies in Central Europe have weakened significantly against the dollar over the past month. …
17th March 2015
The Turkish central bank’s decision to leave interest rates on hold today, rather than cut again, was clearly a response to the latest sell-off in the lira, which has forced President Erdogan to tone down his aggressive demands for the MPC to lower rates. …
The weaker-than-expected 1.6% y/y drop in Polish consumer prices last month was driven largely by an even steeper fall in petrol prices. Meanwhile, Czech activity data released today show that the economy started the year on a strong note. … Poland CPI …
13th March 2015
Today’s decision by the Central Bank of Russia to cut its benchmark one-week repo rate by 100bps appears to have been driven by the stabilisation of the ruble over the past month. Barring a renewed fall in the oil price, and hence the ruble, a few more …
It looks all but inevitable that Ukraine will need to restructure its public debts, but there’s a huge amount of uncertainty about what the restructuring might look like. To shed some light, in this Update we answer five key questions about Ukraine’s …
11th March 2015
Turkey’s current account deficit narrowed substantially in January on the back of a fall in imports. But this wasn’t just due to lower energy imports – non-energy imports fell too. This adds to the evidence that economic growth was extremely sluggish at …
The Turkish government’s attacks on the central bank (CBRT) have become increasingly aggressive over the past month, raising fears about the independence of monetary policy and triggering a sharp sell-off in the lira. In this Watch , we explain how the …
10th March 2015
The 2.2% y/y fall in Turkish industrial production in January was distorted a little by base effects, but even so the data highlight the extent to which the economy is struggling. The consensus view that the Turkish economy will grow by over 3% this year …
9th March 2015
Russian inflation continued to accelerate in February, rising to its fastest pace, at 16.7% y/y, in more than a decade. We think inflation is close to peaking, but the big picture is that it’s likely to remain high over the course of this year. As a …
5th March 2015
The provisional approval of the extension of the Greek bailout has calmed the markets, but the bigger picture is that the road ahead is still long and bumpy. This means that a Greek exit from the euro-zone is still a key risk to the outlook for Emerging …
4th March 2015
The hike in Ukraine’s discount rate by 10.5% to 30% today is a desperate attempt by the National Bank to regain control of the currency, having botched its attempt to tighten capital controls over the past few weeks. The hryvnia has rebounded on the …
3rd March 2015
The rise in Turkish inflation last month, to 7.5% y/y, was probably temporary and we think the headline rate should edge down over the coming months. But the bigger picture is that Turkish price pressures remain strong. Against this backdrop, it will …
The ruble has sold off today but this follows strong gains in recent weeks that made it the best performing EM currency in February. There are several factors that could explain the rebound in the ruble last month but in our view the most convincing …
2nd March 2015
The most striking point from February’s batch of Emerging European manufacturing PMIs was the rebound in the Russian figure, which some have pinned on import substitution. However, our sense is that this probably reflects a more general improvement in …
Concerns over deflation have started to resurface across the emerging world. But the latest deceleration in inflation has been driven by last year’s plunge in oil prices. Accordingly, we continue to think that the risk of a sustained period of deflation …
27th February 2015
February’s Economic Sentiment Indicators (ESIs) brought further evidence that most economies in Central and South Eastern Europe are weathering twin headwinds from Greece and Russia relatively well. Manufacturing has weakened in parts of the region but …
26th February 2015
The latest data have given mixed signals on the performance of Emerging Europe’s economies. The encouraging news is that growth in much of Central Europe (particularly Poland and Hungary) seems to be holding up well. Admittedly, data released this month …
25th February 2015
Turkey’s central bank (CBRT) justified today’s decision to lower interest rates on the grounds that inflation has fallen back, but the reality is that it remains under intense pressure from the government to loosen policy to support growth. This pressure …
24th February 2015
Financial markets in Emerging Europe have brushed off renewed concerns over Greece – indeed, equity markets in most countries have rallied over the course of this month and currencies have generally strengthened too. This has been particularly true of …
23rd February 2015
The release of January’s activity data for Russia was delayed by two hours today but when they finally arrived they brought further evidence that consumers are bearing the brunt of the economy’s problems. Meanwhile, weaker-than-expected data for Poland …
18th February 2015
It has been suggested in some quarters that huge capital outflows from Russia last year were largely due to external debt repayments and thus should not be seen as a major cause for concern. But while there is some truth in this, the bigger picture is …
17th February 2015
The deepening downturn in Russia will depress aggregate growth across Emerging Europe this year but the outlook for most countries will be shaped more by developments in the euro-zone than it will by events in Russia or Ukraine. Exports to the euro-zone …
The larger-than-expected drop in Polish inflation in January, to -1.3% y/y, should seal the deal on an interest rate cut at the next MPC meeting on 4 th March. … Poland Consumer Prices …
13th February 2015
Preliminary Q4 GDP data for Central and Eastern Europe show that regional growth slowed from 3.0% y/y in Q3 to 2.7% y/y in Q4, which is still pretty strong given the problems in Russia and some parts of the euro-zone at the end of last year. A pick-up in …
It’s widely acknowledged by now that the Russian economy is set for a deep recession this year and we think a fall in output of around 5% is likely. This would be similar in scale to the contraction during Russia’s 1998 crisis, but the key point is that …
12th February 2015
The scale of the package of financing for Ukraine announced this morning should be adequate to cover financing needs for a couple of years and will remove an element of uncertainty surrounding the balance of payments and the health of the banking sector. …
Renewed weakness in Germany and the crisis in Russia will weigh on the Czech Republic’s key export sector in the coming quarters. However, the conditions are in place for domestic demand to strengthen, which should drive steady, if unspectacular, growth …
10th February 2015
After a year of stability, Central Europe’s currency markets sprung back to life over the past month as the ECB unveiled a QE programme and the Swiss National Bank (SNB) decided to scrap its exchange rate ceiling. In this Watch we explain why, although …
9th February 2015
The fall in the Turkish lira against the US dollar over the past couple of weeks has raised fresh concerns about the country’s relatively high burden of dollar-denominated debt. But at the same time, the lira has strengthened against the euro and the …
6th February 2015
The fact that the ruble has strengthened since Russia’s surprise cut in interest rates last Friday is more a reflection of the subsequent rebound in global oil prices than it is an endorsement by markets of the central bank’s action. Movements in oil …
Strong industrial production figures from both the Czech Republic and Hungary in December provide further evidence that Central Europe is weathering headwinds from the euro-zone relatively well. On the basis of these data, we suspect that preliminary Q4 …
Inflation in Russia jumped to a five-year high of 15.0% y/y last month, as the effects of the sharp fall in the ruble towards the end of last year led to a surge in import prices. The big rise in inflation may now have happened, but we expect it to rise …
5th February 2015
Having left its policy interest rate unchanged at 2.0% earlier today, the Polish MPC pretty much confirmed at the post-meeting press conference that a rate cut is on the way in March. For now, we expect 25bp rate cuts at the next two MPC meetings, which …
4th February 2015
