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The discussion about how to soften the fallout from the Ukraine crisis on the Russian economy has started to shift towards fiscal stimulus, with key ministers advocating looser fiscal policy earlier this week. But while fiscal stimulus could cushion the …
10th April 2014
Following the decision to leave interest rates on hold earlier today, Governor Belka acknowledged that the Polish economy appears to be undergoing a strong recovery at this afternoon’s post-meeting press conference. Nonetheless, with inflation pressures …
9th April 2014
Unrest in the east of Ukraine has cast the spotlight back onto the political troubles facing the country’s interim government. What happens from here is highly uncertain, but in the meantime the economy is still extremely fragile. The recently-agreed deal …
8th April 2014
The recent appreciation of the Turkish lira has caused the central bank’s (CBRT’s) MPC to adopt a more dovish stance, with Governor Basci suggesting that measures might be taken this month to loosen monetary conditions. For our part, we think it would be …
7th April 2014
Prime Minister Orban’s Fidesz party swept to victory in yesterday’s parliamentary election in Hungary and, in the very near term, his premiership is likely to come alongside a strengthening economic recovery. But the bigger picture is that there are …
The final estimate of 2013 GDP data reveals that Russia’s economy picked up a little pace towards the end of last year. But our GDP Tracker suggests that the recovery had already started to fizzle out in the first few months of this year – and the fallout …
1st April 2014
Manufacturing PMIs fell across Emerging Europe last month, but in the highly-open economies of Central Europe the data are still consistent with robust manufacturing output growth, of 7-10% y/y. By contrast, the data showed that manufacturing in Turkey …
Turkish municipal election results showed that PM Erdogan and the ruling AK party continue to enjoy high levels of popularity, bolstered by the strength of the economy. Nonetheless, in spite of today’s release of strong Q4 GDP data, we expect growth to …
31st March 2014
The deterioration in the inflation outlook and concerns about triggering a sell-off in the currency caused the National Bank of Romania to bring its easing cycle to an end. But, barring a sharp fall in the leu, we don’t think policymakers will start to …
28th March 2014
A spike in global agricultural commodity prices has raised concerns that the current period of subdued inflation in the emerging world could be nearing an end. But the recent increases still leave global prices lower than a year ago, making it highly …
The weakness of Czech inflation prompted the National Bank’s MPC to strike a slightly more dovish tone at this afternoon’s post-meeting press conference. The strengthening economic recovery means further easing is unlikely, but we think monetary …
27th March 2014
This morning’s announcement by the IMF that it has reached a staff level agreement to provide financial support to Ukraine of $14-18bn reduces the risk of a balance of payments crisis and a default on public foreign currency debt. The current government …
The escalation of the crisis on the Crimean peninsula is already taking a toll on Russia. The economy was doing little more than stagnate even before geopolitical tensions flared up. And large scale private sector capital flight of around $70bn in Q1 …
26th March 2014
Following the cut in interest rates in Hungary earlier today, the MPC gave the clearest signal yet that the easing cycle has come to an end. Policymakers did not completely close the door on further easing. But if more rate cuts are forthcoming, they’re …
25th March 2014
Russia’s financial markets have posted heavy losses following the escalation of the crisis on the Crimean peninsula. Indeed, Russia’s stock market and the ruble have been the worst performers among all major EM equity markets and currencies since the …
24th March 2014
The sharp fall in the ruble over the past few months is unlikely to have a major impact on Russia’s economy as a whole , but it will create winners and losers within the economy. The government is likely to be one of the major winners. By contrast, …
21st March 2014
Having emerged from the global financial crisis in surprisingly robust health, Poland’s economy slowed sharply in 2012-13. Nonetheless, growth has started to pick up more recently and, as we explain in this Focus , we think there are five reasons to …
20th March 2014
The Turkish central bank left interest rates on hold today, but the bigger picture is that high inflation and a large current account deficit mean that policymakers will have to keep monetary conditions tight. As such, we expect growth to slow sharply …
18th March 2014
We estimate that net private sector outflows of capital from Russia have totalled $50bn since the start of the year – equivalent to 2.5% of GDP. What’s more, if the current pace of capital flight continues over the coming weeks, net outflows are on course …
17th March 2014
Having hiked interest rates at an unscheduled meeting earlier this month, it was always likely that the Central Bank of Russia would leave them unchanged at today’s (scheduled) Board meeting. Attention is now turning to when and how quickly policymakers …
14th March 2014
Ruling parties look set to win handsomely in parliamentary elections in Hungary and local elections in Turkey in the coming weeks. However, while the outcomes may be foregone conclusions, both countries could suffer from financial market volatility in the …
The direct economic impact of the sanctions that have apparently been agreed by Western governments on Russia is likely to be limited. But the indirect impact – including the anticipation of further, more stringent, measures – could be more damaging. … …
13th March 2014
The crisis in Ukraine has unsettled the markets, but the economic fallout should be contained to the two countries directly involved – Ukraine and Russia. Ukraine is by far the more fragile of the two and is in urgent need of financial support to avoid a …
12th March 2014
It looks like Ukraine’s banking sector has withstood the political crisis in better shape than we had feared. Credit conditions are likely to tighten sharply over the coming months, but a messier outcome seems to have been averted. Recent progress towards …
11th March 2014
The breakdown of Q4 GDP data for Central and South Eastern Europe shows that, while exports remain the main driver of growth in the region, domestic demand is coming out of its recent slump. … Domestic demand joining the …
6th March 2014
While the National Bank of Poland pledged to keep interest rates unchanged until at least the end of Q3 this afternoon, we think that the weakness of inflation should allow the MPC to leave interest rates at their current level of 2.5% into next year. … …
5th March 2014
The economies of Central and Eastern European are the most exposed to spillovers from the crisis in Ukraine, but as things stand the economic impact is likely to be limited. Admittedly, the crisis has the potential to escalate – the key risk for the …
4th March 2014
Although financial markets in Russia have tumbled today, the immediate fallout from the Ukraine crisis for Russia’s economy might well be less severe than many fear. Nonetheless, with growth already stagnating, it will only add to the headwinds facing …
3rd March 2014
February’s PMIs show that manufacturing in Emerging Europe continued to strengthen. Poland and the Czech Republic are leading the way and, encouragingly, the PMI components suggest that domestic demand is now strengthening alongside external demand. …
Events in Ukraine have been one factor behind the fall in the Russian ruble, but domestic problems have played a role too. The central bank (CBR) has already voiced its concern that exchange rate weakness could fuel inflation, leading some to argue that …
28th February 2014
The breakdown of Polish Q4 GDP data confirmed that the recovery at the end of last year was driven by improving household consumption. Looking ahead, we expect growth to strengthen over the coming quarters. Some have raised concerns that spillovers from …
It’s difficult to gauge the immediate impact of recent developments in Ukraine on the economy, but historical evidence from similar instances of unrest and political transition suggests that GDP growth rates can weaken by between 4%-pts and 8%-pts in the …
27th February 2014
In aggreate terms, there is little sign that currency weakness is leading to higher emerging market (EM) inflation. With few signs of a build-up in domestic price pressures either, we expect EM inflation to remain relatively subdued. … EM inflation …
As Ukraine’s political transition progresses, attention has turned to the urgent need for external assistance in order to avoid a balance of payments crisis and possibly even a default on its external debt. There are two key points to note. First, …
26th February 2014
Industry in the highly-open economies of Central Europe has gathered steam in recent months, with output expanding by as much as 6-7% y/y. Manufacturers have been supported by the strengthening of the German economy, into which they are integrated via …
It goes without saying that, with events in Ukraine in an almost constant state of flux, predicting what might happen next is close to impossible. In this Update we outline four factors that will be crucial in determining how events are likely to unfold. …
24th February 2014
Ukraine’s bond market has been pummelled following the escalation of the political crisis in recent days. And the hryvnia has continued to weaken. Elsewhere, Russian and Hungarian assets have performed poorly over the past month. In contrast, the Turkish …
20th February 2014
Russia’s economy slowed further at the start of this year, with output now doing little more than stagnating in year-on-year terms. Nonetheless, the sharp drop in the ruble over the past few weeks has removed any lingering possibility that interest rates …
19th February 2014
Having lowered interest rates by a little more than the market expected today, the Hungarian central bank’s post-meeting communiqué (unusually) didn’t give much away about the outlook for monetary policy. We suspect that, barring a further sell-off in the …
18th February 2014
Our latest Banking Heat Map shows that lending conditions are diverging across the region. Credit growth is gathering pace in countries with healthier banking sectors, such as the Czech Republic, Poland and Slovakia. But in South Eastern Europe and …
17th February 2014
The Central Bank of Russia (CBR) left interest rates on hold today but signalled that it was ready to tighten policy if there were signs that the recent fall in the ruble was fuelling inflation pressures. We don’t think that interest rate hikes are …
14th February 2014
This morning’s raft of flash Q4 GDP estimates from Central and South Eastern Europe was, for the most part, stronger than our above-consensus forecasts and suggests that growth in Emerging Europe as a whole rose at its fastest pace in 18 months. Following …
Turkey’s current account deficit widened sharply at the end of last year, but the recent tightening of monetary policy means it could now start to narrow substantially. Elsewhere in the region, external shortfalls fell in 2013, which helps to explain why …
13th February 2014
The need for economic reform in Russia is now widely accepted. However, a key point that is often overlooked is that a comprehensive programme of reform that takes in a wide range of different areas is needed if Russia is to achieve the type of growth …
12th February 2014
The raft of Q4 GDP data for Central and South Eastern Europe due later this month is likely to show that large parts of the region are on the mend, with Poland now the region’s star performer. We will have to wait longer for Q4 data from the region’s two …
10th February 2014
It’s too soon to fully gauge what impact the recent financial market turmoil and sharp rise in interest rates might have on Turkish growth. But at first glance, there seems to be a real risk that the economy could slip into recession over the coming …
7th February 2014
Following today’s Czech rate-setting meeting, Governor Singer commented that the MPC could end its policy of FX intervention to weaken the koruna by early next year. With the economy recovering and the lagged impact of the weaker currency on import prices …
6th February 2014
The hryvnia has fallen sharply over the past few days, reaching 9/$ earlier today, its lowest level since 2009. We estimate that the currency needs to fall by a further 15% or so, to around 11/$, in order to put Ukraine’s balance of payments position on a …
5th February 2014
Poland’s economic recovery has caused some MPC members to become more hawkish on interest rates. But with inflation likely to remain below target both this year and next, we still think the first rate hike will be delayed until 2015. … First Polish rate …
Following today’s decision to lower Romanian interest rates, Governor Isarescu hinted that the rate cutting cycle may now have come to an end. Policymakers seem to have become concerned that they can’t lower the benchmark rate further without risking a …
4th February 2014
