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Growth in Central Europe accelerated in Q2, helped by improving conditions in the euro-zone, but the economies of South Eastern Europe seem to have weakened once again. The potential for further flare-ups in the euro crisis means that the path ahead is …
14th August 2013
Second quarter GDP data from Russia were not only much weaker than expected – according to our estimates they are also consistent with the economy having fallen into recession during the first half of this year. … Russia enters …
9th August 2013
The Central Bank of Russia kept interest rates on hold today, but the accompanying statement provides some hints that policy may start to be eased over the coming months. Even so, dramatic cuts in interest rates remain unlikely. We’ve pencilled in a 75bp …
The raft of GDP data due over the next few weeks is likely to show that growth in Emerging Europe picked up in the second quarter of this year. However, while the region as a whole seems to have turned the corner, a meaningful recovery in its largest …
8th August 2013
The surprise decision by the National Bank of Romania (NBR) to accelerate the pace of policy easing reflects several factors, including a growing conviction that inflation will fall back by the end of this year and the insurance offered by a new …
5th August 2013
The Czech National Bank kept interest rates on hold at 0.05% today, but the post-meeting press conference provided the clearest signs yet that some policymakers are keen to adopt unconventional policy easing. At the moment, the MPC appears to be divided …
1st August 2013
July’s manufacturing PMI surveys suggest that the recovery that started in Poland and the Czech Republic towards the end of the second quarter continued in the first month of the third quarter. Both countries remain vulnerable to a relapse in the …
The slowdown in Emerging Europe appears to have bottomed out in recent months and there are tentative signs of a turnaround in regional growth. At a country level though, it’s actually been a disappointing few months for the region’s two biggest …
29th July 2013
The stimulus measures agreed by Russia’s cabinet yesterday are unlikely to radically transform the outlook for the economy. We continue to expect a modest recovery over the second half of this year, but the key point remains that structural reforms rather …
26th July 2013
Emerging market inflation rose last month, but the combination of soft core price pressures and falling global food price inflation means that any further increases are likely to be limited. … EM inflation turns around, but big pick-up …
24th July 2013
Financial markets across Emerging Europe have recouped some of their losses from the sell-off last month. Looking ahead, we see some scope for gains in the region’s equities and currencies over the next 18 months or so. However, we’re relatively downbeat …
The National Bank of Hungary’s commitment to cut interest rates to a new record low of 3.0-3.5% over the coming months appears to be a bold step into the world of “forward guidance”. But the reality is more mundane. The “new framework” announced by …
23rd July 2013
In a statement last week the governor of Turkey’s central bank, Erdem Basci, gave markets a strong steer that interest rates would be raised at tomorrow’s MPC meeting. But this is unlikely to result in a hike in the benchmark one-week repo rate. Instead, …
22nd July 2013
Hungary has been buoyed by a raft of good news over the past few months. Q1 GDP data showed that the economy exited recession, the budget deficit has narrowed to the extent that the European Commission lifted the country out of its excessive deficit …
18th July 2013
There is little evidence in June’s activity data that Russia’s struggling economy is about to turn the corner. All told, it seems that GDP grew by around 1.5-2.0% y/y in the second quarter – broadly unchanged from the pace of expansion in Q1, which itself …
17th July 2013
The suggestion by some commentators that the new lending facility unveiled by the Central Bank of Russia last week amounts to a form of quantitative easing seems wide of the mark. All the signs so far are that lending under the new facility will simply …
16th July 2013
The fall in the lira and the sharp rise in bond yields over the past month have cast the spotlight back onto Turkey’s persistent current account deficit and dependency on foreign capital inflows. At the root of this problem lies the country’s low domestic …
15th July 2013
Russia’s Central Bank kept its benchmark interest rates unchanged at its first meeting under the new governor, Elvira Nabiullina, confirming our view that the change in leadership at the CBR is unlikely to result in a major change in the policy stance. As …
12th July 2013
There are encouraging signs that the slowdown in Emerging Europe has bottomed out in recent months and we think growth should strengthen over the second half of this year. The recovery will remain fragile though, and vulnerable to periodic flare-ups of …
10th July 2013
The scale of yesterday’s intervention by the Turkish central bank to defend the lira underlines the vulnerabilities that have built in the country’s economy. We are tweaking some of our forecasts, but the key message is that economic growth is likely to …
9th July 2013
The slump in Ukrainian FX reserves to a six-year low serves as a reminder that Ukraine’s fragile external position continues to keep it one step away from a full-blown balance of payments crisis. … Ukraine: FX reserves drop to 6-year …
8th July 2013
Following today’s cut in Polish interest rates, we now expect rates to be kept on hold until 2015. If anything though, the risks to this forecast lie on the downside. Elsewhere, there are concerns that the sharp jump in Turkish inflation last month could …
3rd July 2013
Today’s cut in Romanian interest rates is likely to be followed by further policy easing over the coming months. However, the scope for aggressive loosening is limited by the country’s high level of FX debt. All told, we expect the National Bank to lower …
1st July 2013
The latest batch of Emerging European manufacturing PMIs adds to the growing sense that things are improving in the region. This reinforces our view that growth in the second half of this year is likely to be stronger than in the first. Even so, we still …
Our latest Banking Heat Map suggests that credit conditions in most countries in Emerging Europe remain extremely tight. The main exception is Turkey, where credit growth has accelerated again in recent months, albeit at the expense of growing …
28th June 2013
The latest activity data from Emerging Europe provide some grounds for cautious optimism. Growth in the highly open Central European economies appears to be picking up, albeit from low rates. And while there’s no sign yet of a recovery in Russia and …
26th June 2013
Policymakers in Hungary and Poland look set to cut interest rates at least once more, probably next month, but we think easing cycles are nearing an end in both countries. … Hungarian and Polish easing cycles nearing an …
25th June 2013
The debate over the role of policy stimulus in reviving Russia’s flagging economy has been given extra impetus over the past week by the release of the IMF’s latest Article IV report, which argues that looser policy would do little to support growth. But …
21st June 2013
Part of the weakness of May’s activity data in Russia can be explained by working day effects. Nonetheless, the bigger picture is that while there is some (albeit tentative) evidence that the slump in growth over the past year may be bottoming out, there …
20th June 2013
Emerging Market (EM) inflation edged down last month and looks likely to remain subdued, in spite of the recent sell-off in EM currencies. … Currency sell-off unlikely to push EM inflation …
19th June 2013
Turkey’s financial markets have taken a pounding over the past few weeks as the recent wave of protests caused investors to take fright. Elsewhere, currencies and foreign currency bonds have lost ground across Emerging Europe against the backdrop of fears …
The Turkish central bank’s decision to keep interest rates on hold today probably marks the end of the easing cycle. In fact, policymakers have already tightened monetary conditions in recent weeks. And looking ahead, concerns about a potential tapering …
18th June 2013
The financial markets have shrugged off the resignation of Czech Prime Minister, Petr Necas, this morning. However, the corruption allegations that led to his departure, as well as the recent outbreak of protests in both Turkey and Bulgaria, serve as a …
17th June 2013
There are signs that pressure from the Russian government on both the central bank and commercial banks to lower interest rates may be starting to have an impact on borrowing costs in the real economy. The problem is that this has so far failed to trigger …
13th June 2013
The Turkish central bank’s much-vaunted “reserve option mechanism” doesn’t appear to have smoothed movements in the currency, as had been hoped. This means that the Bank may have to rely on more conventional measures to shore up the lira. … Turkey’s ROM …
12th June 2013
First quarter GDP growth in Turkey was stronger than expected, driven by an impressive turnaround in domestic demand. But the flipside of domestic demand-led growth is that the current account deficit is widening again, a trend that has continued at the …
11th June 2013
The protests that have gripped Turkey over the past couple of weeks have come at a time when the country’s economic vulnerabilities appear to be mounting. This week, as well as the ongoing protests, the markets will have to digest tomorrow’s Q1 GDP …
10th June 2013
Sergey Ignatiev ended his tenure as governor of the CBR by leaving key interest rates on hold today but, with inflation on course to fall over the second half of the year and Mr. Ignatiev’s successor likely to take a more dovish stance, we think the Bank …
Although it is difficult to draw a direct link between political stability and GDP growth, it does seem that better governance has played a key role in attracting the inflows of foreign capital that have underpinned Turkey’s improved economic performance …
7th June 2013
The breakdown of Q1 GDP across Emerging Europe showed that the region’s economy is probably in a slightly better shape than the (weak) headline growth figures would suggest. Accordingly, we think that growth will accelerate a little over the coming …
6th June 2013
Today’s convergence report by the EC, which gave the green light to Latvia to join the euro-zone in 2014, is likely to lead to further suggestions that Latvia serves as a role model of “internal devaluation” for the euro-zone periphery. However, it is …
5th June 2013
Following today’s cut in Polish interest rates, Governor Belka gave few hints about the likelihood of further easing. We think it’s most likely that interest rates will be left on hold at 2.75% over the coming months, although the risks to this forecast …
The sharp increase in Russian inflation in May means that interest rates are likely to be left on hold when Russian central bankers meet next week. However, inflation continues to be driven by food prices, while core pressures remain subdued. As such, we …
4th June 2013
While Turkish asset prices have regained some of their lost ground today, the outbreak of protests over the past few days has re-focused attention on the country’s economic vulnerabilities. In particular, it is highly reliant on external funding, which …
May’s PMIs provided some encouraging signs that manufacturing in Central Europe is turning the corner, helped by stronger demand from Germany. Worryingly though, the data indicate that the Turkish economy was slowing even before the outbreak of violent …
3rd June 2013
The breakdown of Polish Q1 GDP data confirmed that domestic demand remained extremely weak and it looks like there has been little improvement in April. Combined with below-target inflation, we think this means that the National Bank will cut interest …
29th May 2013
The weakness of Hungary’s economy, coupled with below-target inflation, means that further interest rate cuts are likely over the next couple of months. However, we think the country’s high level of foreign currency debt means that many commentators and …
28th May 2013
April’s activity data will dent any remaining hopes for a quick rebound in Russian growth following the slump in Q1. As a result, the Central Bank is likely to come under yet further pressure to cut interest rates. But aggressive easing remains unlikely. …
24th May 2013
The raft of preliminary GDP data released earlier this month provided some hope that the region’s slowdown bottomed out in the first quarter of the year. Nonetheless, growth is extremely weak, at just under 1% y/y, and performances across Emerging Europe …
The continued weakness of Russia’s economy has led to questions about what policymakers can do to stimulate growth and, with the central bank reluctant to loosen monetary policy, there is a growing likelihood that the government will turn to fiscal …
23rd May 2013
