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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
Having lowered interest rates earlier today, Romania’s National Bank Governor, Mugur Isarescu, gave a strong hint that further cuts are likely in the months ahead. This dovish stance has been supported by weaker-than-expected inflation as well as sluggish …
5th November 2013
The partial release of October’s manufacturing PMIs for Emerging Europe provide further evidence that the region’s recovery continued at the start of the fourth quarter. The Czech PMI is now consistent with manufacturing production rising by around 2.5% …
1st November 2013
Growth in Emerging Europe continues to accelerate, but the recovery remains uneven. Central Europe, and Poland in particular, is leading the way. This is thanks to the recent improvement in key euro-zone trading partners as well as strengthening domestic …
31st October 2013
Hungarian policymakers cut interest rates again today, but there are a whole host of reasons to think that the easing cycle is nearing an end. The economy is recovering and core inflation is rising. What’s more, it’s not clear that rates can be lowered …
29th October 2013
This weekend’s inconclusive Czech legislative election has raised the prospect of a prolonged period of political uncertainty, which many suggest could have a detrimental impact on the economy and the financial markets. But this overlooks the fact that …
28th October 2013
Equity markets in Emerging Europe have outperformed the rest of the emerging world over the past month. The largest gains have come in Central Europe, where the growth outlook continues to improve. Looking ahead, we think there's scope for further gains …
25th October 2013
The early signs suggest that Turkey’s economy has emerged from this summer’s turbulence in financial markets relatively unscathed. Nonetheless, while GDP growth appears to have held up, it has been supported by a further expansion of credit and …
24th October 2013
Emerging market (EM) inflation has been fairly stable in recent months. It edged up in September but there is little reason to think that a sharp acceleration is in the offing. … EM inflation likely to remain in …
The decision by the Turkish central bank to keep interest rates on hold today reflects the stabilisation of capital inflows and the strengthening of the lira over the past couple of months. But concerns about the current account deficit, coupled with …
23rd October 2013
The latest economic data from Emerging Europe shows that, while growth in the region as a whole is accelerating, the recovery remains extremely uneven. In Poland, GDP growth seems to have picked up sharply in Q3. But the region’s largest economy, Russia, …
17th October 2013
Inflation in Central and South Eastern Europe slowed to a record low in September and is likely to remain subdued throughout 2014, even as growth recovers. This in turn should mean that monetary policy will remain extremely accommodative. … Inflation …
16th October 2013
While the economic challenges facing Russia and Turkey are growing, we're becoming increasingly optimistic about the outlook for the rest of Emerging Europe. The pick-up in growth in recent months has owed much to the turnaround in the euro-zone in …
15th October 2013
Having introduced an entirely new benchmark interest rate at its last meeting and unveiled new lending facilities at each of its two meetings prior to that, the Central Bank of Russia opted to do nothing today, leaving key rates and lending facilities …
14th October 2013
Ukraine’s banks have substantially decreased their external vulnerabilities over the past few years, meaning that they are now better placed to withstand a modest hryvnia devaluation and/or a slowdown in capital inflows. That said, the banking system is …
11th October 2013
The slump in Russia’s economy over the past year is starting to weigh on its public finances. The deterioration has so far been fairly modest and the fiscal position looks manageable for now. But the budget deficit is likely to widen in 2014-15, leaving …
9th October 2013
The tendency of most forecasters (including ourselves) to focus on the growth prospects for Emerging Europe over a one or two year horizon means that the region’s medium-term growth potential is often overlooked. In general, we’re pretty upbeat. But …
7th October 2013
With Poland’s economy now picking up, attention is turning to when monetary policy might start to be tightened. The financial markets are pricing in a first rate hike in Q1 of next year. However, we think that inflation is unlikely to rise substantially …
2nd October 2013
September’s PMIs suggest that manufacturing in the highly-open Central European economies continued to recover and that Turkey’s manufacturing sector rebounded. However, growth in Turkey appears to have been driven by domestic demand which suggests that …
1st October 2013
The Romanian central bank cut interest rates again today against the backdrop of weak growth and falling inflation. However, the Bank lowered rates by less than it did in August due, it seems, to fears of currency weakness – a particular concern in …
30th September 2013
A recent warning from Russia’s Deputy Finance Minister has led to renewed concerns about the country’s growing burden of external debt. But while debt has risen sharply in recent quarters, we don’t think that it is a cause for immediate concern. … …
September’s European Commission Economic Sentiment Indicators (ESIs) allow us to form an early view of how Emerging Europe has performed in Q3, and the good news is that the recovery seems to be building momentum. Growth appears to have accelerated in …
27th September 2013
The latest activity data show that Emerging Europe’s recovery is continuing. Detailed Q2 GDP figures released this month confirmed that the region as a whole grew by 1.6% y/y, up from 1.3% y/y in the first quarter. And more timely data suggest that …
The strengthening of the Czech economy is preventing the National Bank from plumping for furtherpolicy easing, namely FX intervention to weaken the koruna. With the economic recovery still fragile, theMPC is likely to keep the threat of intervention on …
26th September 2013
Emerging market inflation edged down in August and there’s little evidence to suggest that there will be a significant rise in price pressures over the coming months. … Few signs of EM inflation …
24th September 2013
Following today’s cut in Hungarian interest rates, we are revising our year-end rate forecast to 3.00% from 3.50%. With inflation below target and the economic recovery still fragile, it looks like the dovish MPC will seek to ease policy as far as it can. …
The reaction of the financial markets in Central Europe to the US Fed’s decision to hold off tapering QE was decidedly muted. But these countries’ markets didn’t suffer the large sell-offs seen elsewhere in the emerging world last month. Looking ahead, …
The outlook for much of Emerging Europe has brightened in recent months and we expect growth in most countries to accelerate over the coming quarters. The strengthening of the euro-zone should support local industry while a gradual recovery in domestic …
20th September 2013
The weakness of August’s activity data for Russia is partly due to working day effects since August of this year had one fewer working day than August of 2012. Even so, today’s data reinforce our view that despite signs of recovery in other parts of the …
18th September 2013
Having been promised “surprise” measures to shore up the lira by Governor Basci, today’s Turkish rate setting meeting was a non-event. Policymakers appear to be waiting to see how the financial markets react to tomorrow’s FOMC meeting, at which the US …
17th September 2013
Emerging Europe has been the laggard of the emerging world over the past few years, due in large part to problems in its banks. But with the region seemingly on the mend, might local banking sectors now support growth? In this Watch , we show that while …
The Central Bank of Russia today laid out plans to revamp and streamline the instruments through which it provides liquidity to banks. Over time, these should help to increase transparency but they won’t have any impact on immediate monetary conditions. …
13th September 2013
At first sight, the stability of the hryvnia over the past few months suggests that Ukraine has been relatively insulated from the sharp sell-off in other emerging markets. But a closer look reveals that currency stability has been achieved thanks to …
11th September 2013
Following today’s stronger-than-expected Turkish Q2 GDP data, we are revising up our growth forecast for this year as a whole. However, growth was driven by credit-fuelled consumer spending and a rebound in inventories, neither of which appear …
10th September 2013
Despite continued high oil prices, Russia’s current account surplus has fallen from around 7% of GDP prior to the 2008/09 crisis to around 2% now and is on track to slip into a deficit by 2015. Given its large foreign currency reserves, Russia could …
6th September 2013
Governor Belka provided few clues at his post-MPC press conference about when the Polish National Bank might shift towards tightening mode. But with the economic recovery unlikely to be accompanied by a substantial rise in inflation, we think the MPC may …
4th September 2013
The breakdown of GDP data for Central and South Eastern Europe confirmed that the acceleration in growth seen in Q2 was largely a result of stronger demand from the euro-zone. But there were also encouraging signs of a long-awaited turnaround in consumer …
The severity of the slowdown in the Polish economy over the past 18 months took commentators and policymakers by surprise. The good news is that the slowdown appears to have been largely cyclical in nature and that most of Poland’s previous drivers of …
3rd September 2013
The raft of manufacturing PMIs across Central Europe for August provide further evidence that the region’s recovery is gathering pace, helped by the improvement in the German economy. In contrast, although the PMIs improved in Russia and Turkey, their …
2nd September 2013
The breakdown of Q2 Polish GDP data underlined that its tentative economic turnaround is largely a result of stronger external demand. But with the recovery in the euro-zone set to be modest, growth in Poland is likely to be fairly weak by past standards. …
30th August 2013
It’s been a good month for Central Europe, although the news elsewhere in the region has been less encouraging. A raft of preliminary Q2 GDP data showed that, although growth remains weak in Central Europe, it is accelerating. What’s more, forward-looking …
28th August 2013
The Turkish central bank appears ready to add to its policy toolkit in order to support the lira. No details have been provided yet, but our best guess is that, if new measures are introduced, they are likely to involve restricting the amount of foreign …
The fact that the Hungarian central bank cut interest rates by just 20bp today highlights that, even though the forint came through the recent EM sell-off relatively well, Hungary is still highly exposed to any slowdown in capital inflows. We expect a …
27th August 2013
The sell-off in emerging market (EM) currencies this month is unlikely to have much of an impact on EM-wide inflation. Indeed, looking ahead, we think the outlook for EM inflation is fairly benign. … Currency weakness unlikely to cause EM inflation to …
22nd August 2013
The ruble has fared surprisingly well during the latest EM sell-off, in large part due to the fact that oil prices have edged up over recent weeks. Nonetheless, the ruble is still weaker than the usual relationship with oil prices would otherwise imply. …
Emerging European currencies have generally withstood the recent EM financial market sell-off relatively well. Meanwhile, equities in Central Europe have made strong gains over the past month. … Coming through the EM sell-off relatively …
21st August 2013
The further hike in Turkish interest rates today merely underlines how vulnerable the economy is to the recent slowdown in capital inflows. Looking ahead, much will depend on how the current EM sell-off pans out and whether the lira comes under further …
20th August 2013
This report is only available as a PDF. Click to download. … Russia: a modest improvement, but growth remains weak …
19th August 2013
The slump in Q2 growth in Russia reported last week appears consistent with the economy having fallen into recession during the first half of 2013. The good news is that barring an unforeseen external shock (for example a sharp fall in oil prices), the …
16th August 2013
Turkey’s economy has picked up pace over the first half of this year, but this has been fuelled by a sharprise in credit and has come at the expense of a renewed widening of the current account deficit. This is afamiliar pattern. Indeed, over the past 19 …
15th August 2013
