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The government budget for 2015, that was signed by President Putin today, is based on a range of outdated assumptions. Based on current spending plans, we reckon the government is likely to run a budget deficit of 2.0% of GDP in 2015 rather than 0.6% of …
3rd December 2014
The accompanying statement to today’s Polish MPC meeting, at which interest rates were left unchanged, struck a dovish note. But it also stressed that the strength of the economy had eased policymakers’ concerns about deflation. And it emphasised that it …
The rise in Turkish inflation to 9.2% y/y in November, which came in spite of the sharp drop in oil prices, underlines the strength of underlying price pressures in the economy. Given this, it’s difficult to see the central bank lowering interest rates …
The sharp fall in the ruble over the past few days points to another large increase in interest rates when the central bank’s board meets next week. But the fact that the authorities have so far resisted intervening in the foreign exchange market suggests …
1st December 2014
The across-the-board rise in last month’s manufacturing PMIs in Emerging Europe provide further evidence that, in spite of continued weakness in the euro-zone, the region’s economies are ending the year on a strong note. … Manufacturing PMIs …
November’s Economic Sentiment Indicators provide further evidence that, in spite of continued weakness in the euro-zone, growth in Central and Eastern Europe has picked up in Q4. The breakdown of the surveys suggests that strengthening domestic demand is …
27th November 2014
Following sharp falls in commodity prices, concerns have started to mount that parts of the emerging world are about to slip into a damaging period of deflation. Although we think that inflation is set to remain extremely weak for some time to come, …
A combination of interest rate hikes, a move towards a fully floating ruble and steps to limit the provision of ruble liquidity appear to have arrested the slump in Russia’s currency. Elsewhere, the deepening economic crisis in Ukraine has led to a …
26th November 2014
The National Bank of Hungary left interest rates unchanged today and, in spite of negative inflation, the MPC appears to be in no mood to resume policy easing. But equally, there will be little pressure to raise interest rates and we expect monetary …
25th November 2014
Aggressive hikes in interest rates coupled with the central bank’s decision to accelerate the move towards a fully floating currency have helped to stabilise the Russian ruble over the past week. But while the authorities have managed to take some of …
24th November 2014
Russian activity data for last month suggest that the economy withstood the initial sharp drop in the price of oil better than some had feared. But even so, the big picture is that growth is still extremely sluggish at around 0.5% y/y. … Russia Retail …
21st November 2014
One of the most striking aspects of the recent slowdown in the Russian economy is that the previously resilient consumer sector has weakened sharply. And while this may in part be a result of spillovers from the Ukraine crisis, we think there are more …
The slowdown in Polish industrial production growth in October was disappointing and contradicts the improvement in the survey data for that month. However, it seems unlikely that these data will shift the balance on the MPC back in favour of further …
20th November 2014
The accompanying statement to today’s Turkish MPC meeting, at which interest rates were left unchanged, once again suggested that the Council remains concerned about the poor inflation outlook. This is likely to dash hopes that have been growing in the …
The recent fall in oil prices, coupled with the drop in the ruble, has revived memories of 1998 in Russia, when similar developments culminated in a government debt default. The state of Russia’s public finances has improved dramatically since then, …
18th November 2014
Third quarter GDP data for Central and Eastern Europe were surprisingly strong given the headwinds facing the region from Russia and, in particular, the euro-zone. … Central & Eastern Europe GDP …
14th November 2014
Russia’s economy performed better than even we had expected in Q3, but this predates the most recent slump in oil prices. We still expect the economy to slip into recession next year. Elsewhere, Poland slipped further into deflation last month, while …
13th November 2014
Growth across Emerging Europe has slowed in recent months and we expect it to remain soft over the coming quarters. The economies of Central Europe will continue to be held back by weakness in Germany, but a further sharp fall in growth from here seems …
12th November 2014
The raft of preliminary Q3 GDP data due to be published this month is likely to be disappointing, showing a slowdown in growth across the region. While domestic demand seems to have held up reasonably well, most of the slowdown appears to have been due to …
11th November 2014
There are relatively few parallels between the 1998 ruble crisis and the present crisis, but one point in common is that some of the greatest vulnerabilities to a weaker currency lie in the banking sector. This is the place to watch for signs that a …
10th November 2014
The continued slide in the ruble is likely to force the Central Bank of Russia into making a one-off intervention in the currency market, permitted under its new exchange rate policy, rather more quickly than it had initially hoped. It is also likely to …
7th November 2014
The fall of the Berlin Wall marked the start of the transition from central planning to market-based economies in Central and Eastern Europe, which in turn paved the way for a sharp rise in prosperity. But 25 years on, concerns are rising that income …
6th November 2014
Following the surprise decision to leave interest rates on hold today, when most had expected a 25bp cut, Governor Belka didn’t close the door on further easing. But he did shift the emphasis onto growth, rather than inflation, as the trigger for a …
5th November 2014
Russian inflation accelerated to a three-year high of 8.3% y/y in October and, with the lagged effects of a weaker ruble still to come through, a further rise towards 9% y/y is likely over the coming months. … Russia Consumer Price Inflation …
Having cut its policy interest rate by 25bp to 2.75% earlier today, the Romanian MPC didn’t give much away about the outlook for monetary policy at the post-meeting press conference. Nonetheless, policymakers appear to be increasingly dovish on the …
4th November 2014
Last month’s manufacturing PMIs for Central Europe provide further evidence that, having slowed in Q3, the region started Q4 on a stronger note. … Manufacturing PMIs …
3rd November 2014
Russia’s central bank had to deliver two things at today’s Board meeting in order to stem the slide in the ruble : an aggressive hike in interest rates and an immediate overhaul of the current exchange rate “corridor” policy. It delivered on the first, …
31st October 2014
Victor Ponta looks set to win the presidential election in Romania on Sunday at a time when the economy is being buffeted by renewed weakness in key euro-zone trading partners. The economic outlook from here on will hinge in part on external developments …
30th October 2014
The Russian ruble has rallied by around 3% against the dollar today seemingly as a result of central bank intervention on the foreign exchange market … Ruble crisis pushes central bank towards heavy FX …
The sharp fall in oil prices over the past couple of months will keep inflation across Central and South Eastern Europe extremely weak and could push several economies deeper into deflation . Nonetheless, in contrast to parts of the euro-zone, for most …
29th October 2014
The press release accompanying today’s decision by the National Bank of Hungary to keep interest rates on hold was surprisingly upbeat. It largely shrugged off the drop in inflation in September, signs that growth has slowed and renewed weakness in key …
28th October 2014
The continued slide in the ruble over the past few weeks has raised the prospect that Russia is in the grip of a self-fulfilling currency crisis in which the mere anticipation of currency weakness spurs further capital outflows and pushes the ruble …
The victory of pro-Western, reformist parties in yesterday’s election was perhaps the best that could have been hoped for. But with the economy in freefall and the conflict in the east of the country still simmering, their work will be cut out. … Ukraine: …
27th October 2014
The past month has brought further evidence of weaker growth in Central Europe. Admittedly, August’s particularly disappointing data appear to have been distorted by variations in summer holidays. And the early data we have for September suggest that …
24th October 2014
Inflation eased further in September across most of the emerging world, in aggregate reaching its lowest rate in nearly five years. Falling commodity prices and weak underlying price pressures mean that inflation is likely to remain subdued over the …
23rd October 2014
The accompanying statement to today’s Turkish MPC meeting, at which interest rates were left on hold, is likely to quash hopes that have been growing in some quarters for looser policy in response to weaker growth and the fall in oil prices. For our part, …
Our GDP Tracker suggests that growth in the Polish economy slowed to around 2.5% y/y in Q3 from 3.2% y/y in Q2. But it does at least look like the economy strengthened a touch towards the end of the third quarter and early signs suggest that growth may …
The recent fall in the oil price has underlined the perils of Russia’s over-reliance on its energy sector and the corresponding need to develop non-energy sources of growth. Part of the route back to economic vigour is an increase in Russia’s overall …
22nd October 2014
The fall in oil prices over the past month or so poses another headwind for Russia’s struggling economy. The drop in prices so far is unlikely to have a major bearing on the immediate outlook – although it does limit the scope for major fiscal stimulus to …
20th October 2014
The pick-up in Russian activity data in September, while encouraging, may owe more to working day effects than to an underlying improvement in growth. The bigger picture is still one of an economy that is essentially stagnating. … Russian activity data …
17th October 2014
Of all the reasons to expect softer growth in Central and Eastern Europe, the weakness of the German economy is by far the most compelling. Indeed, we estimate that it accounts for the bulk of the slowdown in regional growth over the past six months. … …
16th October 2014
Lending conditions in Russia have tightened in recent months, but there is no sign yet that Western sanctions have led to a sharp drop in bank lending to the wider economy or a credit crunch on the scale of that experienced in 2008. That being said, with …
13th October 2014
Turkey’s recently-published 2015-17 Medium-Term Programme shows that the government remains overly-optimistic on the economy’s growth prospects and still hasn’t acknowledged the strength of underlying price pressures. For our part, we think the next few …
9th October 2014
The fallout from the crisis in Ukraine and the subsequent sanctions imposed by Western governments have certainly contributed to the recent weakness of Russia’s economy. But there are ominous signs – particularly from developments in the labour market – …
Following a larger-than-expected interest rate cut in Poland earlier today, Governor Belka understandably maintained an extremely dovish stance at this afternoon’s post-meeting press conference. At the same time, however, he suggested that today’s move …
8th October 2014
The steep fall in the ruble over the past month will affect different parts of the economy in different ways. The government is likely to be one of the major winners. By contrast, consumers are likely to lose out, as are corporates with large external …
7th October 2014
The rise in the Turkish lira today has brought some respite to the beleaguered currency. And with the central bank now tightening monetary conditions, we wouldn’t be surprised to see a modest rally in the very near-term. But the bigger picture is that the …
2nd October 2014
September’s PMIs suggest that the slowdown in the region’s manufacturing sector may have stabilised towards the end of the third quarter. Encouragingly, the Polish PMI edged up, having fallen for the previous six consecutive months. But the decline in the …
1st October 2014
The sharp sell-off in the Russian ruble and Turkish lira this month couldn’t have come at a worse time for policymakers. Growth is sluggish in both countries, but high inflation and concerns about financial stability mean that monetary policy will need …
30th September 2014
The National Bank of Romania’s rate cut earlier today probably marks the end of the recent easing cycle. After all, forthcoming data are likely to show inflation rising to within the Bank’s tolerance range. But the bigger picture is that monetary policy …
