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As things stand, the recent sharp falls in emerging market (EM) currencies do not appear to be a major threat to EM inflation. Even those emerging economies that have borne the brunt of the currency sell-off do not seem to be on the cusp of a renewed …
31st January 2014
Today’s release of 2013 Russian GDP data suggests that while growth in the rest of Emerging Europe started to recover towards the end of last year, growth in Russia remained extremely sluggish. The old drivers of growth, notably consumer spending, are …
The fallout from the turbulence in EM financial markets has split Emerging Europe into two groups. One group contains Turkey, Russia and Hungary, whose currencies have been among the hardest hit in the emerging world. This reflects deteriorating external …
The sharp sell-off in the ruble over the past week has led some to question whether Russia could be the next EM in line to hike interest rates. For now, we suspect that the Central Bank will stick to FX intervention in order to support the currency. …
30th January 2014
It’s tempting to interpret today’s Polish 2013 GDP data, which showed that growth was as slow last year as it was in 2009, as further evidence of deteriorating growth prospects in the emerging world. But the annual GDP data mask the fact that growth …
The operation of Turkey’s interest rate corridor means that the true extent of monetary tightening announced at last night’s emergency MPC meeting is a little less than the aggressive hike in the benchmark one-week repo rate would otherwise suggest. …
29th January 2014
The Turkish lira has been the worst performing EM currency after the Argentine peso so far this year. This has forced the central bank to announce an emergency MPC meeting later today, at which it looks likely that interest rates will be hiked. Elsewhere, …
28th January 2014
The raft of Russian activity data for December suggests that GDP growth may have picked up a little to around 1.5% y/y in Q4, from 1.2% y/y in Q3. For the year as a whole, this would imply average growth of 1.5% which would mark the Russian economy’s …
27th January 2014
The Ukrainian National Bank’s decision to loosen its grip on the hryvnia will bring benefits in terms of restoring external competitiveness. But there are near-term risks too, including higher inflation and possible strains on banks’ balance sheets. If …
23rd January 2014
Russia’s current account surplus declined over the course of 2013 and, for the first time since the 2008/09 crisis, became insufficient to cover capital outflows. Of course, with over $500bn in FX reserves, Russia’s balance sheet still looks strong. …
22nd January 2014
In spite of the recent sharp fall in the lira, high inflation and rising inflation expectations, the Turkish central bank (CBRT) caved in to pressure from the government and resisted hiking interest rates. As a result, the lira is likely to stay under …
21st January 2014
The recent sharp fall in the lira doesn’t appear to have led to significant FX debt servicing problems for Turkish companies. But given the rapid expansion of corporate FX debt over the past decade, we certainly wouldn’t rule out the possibility that …
17th January 2014
Improved governance appears to have been a key ingredient in Turkey’s economic success story over the past decade. But further reforms will be needed if Turkish incomes are to continue “converging” with those of developed countries. In this context, it is …
15th January 2014
After a torrid run over the past five years, things are looking on the up for Emerging Europe. Of course, the region will remain vulnerable to events in the euro-zone. However, so long as the single currency bloc avoids a relapse in growth, we think the …
13th January 2014
Last month’s EC Economic Sentiment Indicator for Hungary rose to its highest level for over a decade and, on past form, this is consistent with GDP growth of 5% y/y or so. However, it’s worth noting that in previous instances when the economic outlook has …
9th January 2014
Following today's decision to lower interest rates, the Romanian central bank hinted that further policy easing could be on the cards. The country's large external financing needs limit the scope for aggressive rate cuts. But, on balance, we think there …
8th January 2014
The Turkish central bank has been extremely reluctant to raise official interest rates over the past year or so. However, the recent fall in the lira may now force its hand. On balance, we think it is more likely than not that policymakers will raise the …
7th January 2014
The eruption of a high-level corruption scandal in Turkey over the past few weeks has cast a spotlight onto the country's political stability. Better governance appears to have played a key role in attracting the foreign capital inflows that have …
2nd January 2014
Manufacturing PMIs fell across Emerging Europe last month. Russia aside, the PMI readings are still high by the standard of the past couple of years. Even so, today’s data serve as a reminder that the recovery in the region is still fragile. … …
Escalating political protests caused Ukrainian bond yields and CDS premia to spike at the start of the month. However, following the announcement that Ukraine will receive financial assistance from Russia, the markets have rallied. Meanwhile, financial …
20th December 2013
The outbreak of protests in Ukraine has dominated the headlines over the past month. With FX reserves already at perilously low levels, it had looked like the country could be tipped into a full-blown balance of payments crisis. But yesterday's deal with …
18th December 2013
The Turkish central bank took small steps to tighten monetary conditions today but, given the country's vulnerability to Fed tapering, more aggressive measures could be needed next year. In contrast, central banks in the Czech Republic and Hungary …
17th December 2013
Emerging market (EM) inflation remained low by historic standards in November. Recent declines in global commodity prices should dampen inflation over the coming months, while we see little sign of domestic price pressures building. … EM inflation to …
The weakness of the latest inflation data in Central Europe has sparked fears that, like the euro-zone, the region could be at risk of falling into a deflationary spiral. In this Watch , we argue that, while inflation may weaken further over the next …
16th December 2013
The recovery in Emerging Europe has moved onto a firmer footing in recent months and we expect growth to accelerate over the coming quarters. However, the recovery is likely to be patchy and uneven. The economies of Central Europe - notably Poland - will …
13th December 2013
The latest rise in Russian inflation, coupled with mounting concerns over the rapid expansion of consumer credit, mean that even the modest cuts in interest rates that we had pencilled in for early 2014 now look unlikely. We’ve tweaked our forecast and …
Turkish GDP growth held up relatively well in Q3 in spite of the turmoil in the financial markets and a substantial tightening of monetary policy. However, this was made possible by a rapid expansion of credit and coincided with a renewed widening of the …
10th December 2013
Recent comments from Elvira Nabiullina, the Governor of Russia’s central bank, have raised questions about the sustainability of Russia’s boom in consumer lending. While it may be too early to worry about a banking crisis in Russia, we think that the …
9th December 2013
The recent escalation of political protests in Kiev has put Ukraine's fragile external position back in the spotlight. A full-blown balance of payments crisis remains a real risk. The one crumb of comfort is that the threat of a sovereign default is …
5th December 2013
Governor Belka reiterated his “forward guidance” at today’s post-MPC meeting press conference, pledging not to raise interest rates until the end of the first half of 2014 at the earliest. For our part, we think the first rate hike is likely to come in …
4th December 2013
The breakdown of GDP data released this morning for several Central and South Eastern European economies confirmed that the moderate recovery in the third quarter was supported in large part by stronger export growth. In addition, the data confirmed that …
The reaction in the Ukrainian financial markets to escalating political protests in Kiev has been smaller than might have been expected. There is a large amount of uncertainty about what will happen from here on. But with the economy already in recession …
2nd December 2013
The latest PMIs for Emerging Europe show that the region's manufacturing sector strengthened further in November. The important exception is Russia, whose PMI fell back last month, adding to the evidence that the economy is yet to turn the corner. … …
The detailed breakdown of third quarter Polish GDP data showed that, while net trade remained the main driver of growth, domestic demand has finally come out of its year-long slump. … Polish recovery supported by turnaround in domestic …
29th November 2013
A raft of GDP data released over the past month confirmed that growth in Emerging Europe accelerated in Q3, albeit gradually. Overall, we calculate that regional GDP expanded by 1.8% y/y, up from 1.6% y/y in Q2. The recovery is being led by Central and …
28th November 2013
Emerging market (EM) inflation has crept up in recent months, but it remains low by historic standards. Looking ahead, inflation should be kept anchored by subdued domestic price pressures and recent declines in global commodity prices. … EM inflation to …
27th November 2013
Today's cut in Hungarian interest rates is likely to be followed up by one more cut next month, which we currently think will mark the end of the easing cycle. However, the recent sharp fall in inflation, coupled with the surprise decision by the ECB to …
26th November 2013
There’s a lot of uncertainty about what will happen next in Ukraine following the government’s decision to suspend preparations for an Association Agreement with the EU, apparently under pressure from Russia. A move towards Russia could bring some …
25th November 2013
It’s been a bumpy few weeks for equities and currencies in the region. Those in the two largest economies, Turkey and Russia, have underperformed. Meanwhile, the Czech koruna has posted the largest loss among all EM currencies over the past month …
22nd November 2013
In spite of mounting speculation that Croatia’s debt burden will force the authorities to turn to the IMF for help, we think that the country might still be able to avoid a bail-out. Even so, these concerns merely underline the weakness of the fiscal …
21st November 2013
Following last week’s disappointing Q3 GDP growth figures, today’s release of activity data for October suggests that the Russian economy made a weak start to Q4 too. Indeed, the only crumb of comfort is that this summer’s good harvest finally seems to be …
20th November 2013
The Turkish central bank made a small adjustment to its liquidity provision today which should lead to a modest rise in market interest rates. However, there's little more that the MPC can now do to tighten policy without raising official interest rates. …
19th November 2013
Central and South Eastern Europe seems to have shrugged off the slowdown in the euro-zone in the third quarter of this year, with growth accelerating in most countries. The exception was the Czech Republic, where output contracted in quarterly terms. …
14th November 2013
We have been among the most pessimistic forecasters on Emerging Europe over the past five years and the as yet unresolved debt problems in the euro-zone continue to cast a long shadow over the outlook. But assuming that the single currency bloc manages to …
13th November 2013
The weaker-than-expected 1.2% y/y increase in Russian GDP in Q3 is likely to reinforce concerns that the slump in Emerging Europe’s largest economy over the past year will be longer-lasting than many had initially assumed. But although the headline growth …
12th November 2013
Last week’s decision by Russia’s Ministry of Economy to downgrade its forecasts for long-run growth has revived the debate about what policymakers need to do in order for Russia to regain its economic vigour. While most commentators have made the case for …
11th November 2013
The Central Bank of Russia (CBR) kept interest rates on hold today and gave little indication that it is about to loosen policy to support the struggling economy. … Central Bank of Russia still happy to bide its …
8th November 2013
Faced with growing concerns about deflation, the Czech National Bank voted to ease monetary policy further today by intervening in the foreign exchange market to weaken the koruna. Few details were provided, except that the MPC aims to keep the currency …
7th November 2013
The sharp downgrade to the long-run growth forecasts released by Russia’s Economy Ministry earlier today is the clearest signal yet that Moscow believes that economic weakness over the past year has been structural rather than cyclical in nature. One …
The Polish National Bank extended its version of “forward guidance” today, stating that interest rates will be left on hold until the second half of next year. We think the existence of significant slack in the economy means inflation will remain subdued …
6th November 2013
