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As the distortions surrounding Chinese New Year have fallen out of the data, the underlying picture across Emerging Markets is one of weak price pressures. Looking ahead, there are few signs that inflation is about to pick up sharply any time soon. … EM …
21st May 2013
The pace at which parent banks in Western Europe have scaled back funding for subsidiaries in Eastern Europe has slowed further since the start of the year. Nonetheless, credit conditions in much of Eastern Europe remain extremely tight. … Parent bank …
Russia’s Q1 GDP data were not as bad as feared, but growth still slumped to its weakest pace since 2009. This will fuel the ongoing debate about the need for economic stimulus. But with the slowdown being driven in part by structural factors, we fear …
17th May 2013
Turkey’s second investment grade rating awarded last night was long-anticipated and is unlikely to have much impact on bond yields. In fact, Turkey’s large external financing risks mean that it is one of the most exposed EMs to a deterioration in investor …
We think the Turkish central bank (CBRT) will follow up today’s 50bp cut in interest rates with a further 25bp cut over the coming months. But policymakers may also continue to offset the impact of lower interest rates by hiking reserve requirements or …
16th May 2013
While central banks across much of the emerging world are cutting interest rates, high inflation prevented the Central Bank of Russia from doing so today, in spite of the weakness of the economy. Nonetheless, we expect inflation to fall over the coming …
15th May 2013
The raft of preliminary Q1 GDP data for Central and South Eastern Europe, released today and yesterday, suggests that, while the slowdown at the end of last year has bottomed out, growth is sluggish and uneven. On a positive note, Hungary has emerged from …
The slowdown in Emerging Europe appears to have bottomed out at the start of the year. We expect growth to pick up over the second half of 2013, but the risk of a flare-up in the euro-crisis, the fragility of the region’s banks and the threat of a spike …
14th May 2013
Today’s preliminary estimate of Polish GDP showed that the economy was in a weaker state at the start of the year than many had anticipated. Admittedly, there is a fair amount of uncertainty about whether the data will be revised in the future (probably …
A raft of Q1 GDP data due to be released over the coming weeks is likely to show that growth stabilised in most of Emerging Europe. Russia is the notable exception. Here, the slowdown seems to have deepened further. The good news is that regional growth …
13th May 2013
Turkish equities have been the region’s star performer once again over the past month amid growing optimism about the economic recovery, the rising prospect that a second ratings agency will assign Turkey investment grade status and reduced concerns about …
10th May 2013
Following today’s cut in Polish interest rates, Governor Belka was guarded in his comments about whether further policy easing is on the cards. But with inflation likely to fall further below the Bank’s target and activity set to remain sluggish, we …
8th May 2013
In spite of the rapid build up of Turkish banks’ foreign currency assets held at the central bank, we think the country’s banking sector is still more vulnerable to an external shock now than it was on the eve of the 2008/09 global financial crisis. … …
7th May 2013
Romanian policymakers provided pretty clear signs this afternoon that they plan to start easing policy. They were ambiguous on the timing, but we think that interest rate cuts could come once inflation starts to fall back to target in Q3. That said, high …
2nd May 2013
April’s PMIs show signs of a renewed downturn in manufacturing in Central Europe. And tempting as it is to blame the weakness of German industry, it looks like domestic factors are playing a role too. The survey was particularly weak in Poland and, …
The decision by Russia’s Finance Ministry to increase the oil price forecast used in the budget appears to be an effort to paper over shortfalls in non-oil revenues, including from lower-than-expected privatisation receipts. But with oil prices already …
30th April 2013
The slowdown in growth in Emerging Europe appears to have bottomed out in the first quarter of this year. We estimate that, at an aggregate level, the region grew by around 0.8% y/y, in line with growth in Q4 of last year. At a country level, Russia has …
29th April 2013
The weakness of the latest Polish inflation and activity data suggests that the central bank could resume its easing cycle. Admittedly, the MPC appears divided on whether further easing is needed. But we think that sluggish economic growth will prompt a …
25th April 2013
Emerging Market (EM) inflation fell back in March as temporary distortions related to the Chinese New Year dropped out of the annual comparison. Looking ahead, with underlying price pressures remaining weak and global commodity prices now declining, we do …
Following a decade of rapid growth, we think that the Russian economy is entering a new phase where much weaker growth becomes the norm. We believe the economy is unlikely to grow by much more than 2-3% per year over the next decade – well below average …
Falling inflation and an economy struggling to escape from recession mean that further interest rate cuts are likely in Hungary. But we remain of the view that currency concerns will prevent aggressive steps to ease policy. … Forint concerns limit scope …
23rd April 2013
The drop in oil prices over the past month will limit the room for fiscal stimulus in response to the slump in Russia’s economy since the turn of the year and is another reason to expect the recovery to disappoint. But in the absence of a much sharper …
17th April 2013
The raft of Russian activity data for March, due to be released this week, is likely to show a slight improvement from February. But growth in Q1 is still set to be much weaker than at the end of last year. This slowdown has taken policymakers by …
16th April 2013
The weakness of the latest inflation data across Central Europe should allow further loosening of monetary policy, even in Poland, where we have now pencilled in a 25bp rate cut later this year. … Weak inflation to trigger further Polish rate …
15th April 2013
We expect the Central Bank of Turkey to cut its benchmark one-week repo rate for the first time in four months at next week’s MPC meeting. But the myriad of different tools now deployed by the Bank means that despite the likely cut in the policy rate, …
12th April 2013
The Polish MPC appears to have taken a slightly more dovish stance since last month following weaker-than-expected inflation and activity data. Our base case remains that interest rates will be left unchanged this year. But if the recovery fails to …
10th April 2013
The failure of the authorities to agree on a new IMF programme leaves Ukraine extremely exposed if financial market tensions flare up again. Meanwhile, the government has recently unveiled its economic programme for 2013-14 worth some 30% of GDP, which …
Most Emerging European stock markets and currencies have weakened over the past month on the back of the Cypriot crisis and fears of contagion to the rest of the euro-zone. This serves as a timely reminder that the crisis in the euro-zone is far from …
8th April 2013
Pressure is mounting on Russian policymakers to act to stimulate the slowing economy. But unlike in 2008-09, there is little room for a large-scale fiscal stimulus. And substantial cuts in interest rates are unlikely given that rates are already close to …
5th April 2013
The “Funding for Growth” scheme announced by the National Bank of Hungary is not quite as radical as it could have been. This helps to explain the relatively muted reaction in the financial markets, but it also means that the overall impact on lending …
4th April 2013
Detailed Q4 GDP data for Russia, released earlier today, confirmed what we already knew – namely that economic growth slowed to its weakest pace in three years in the final quarter of last year. More importantly, growth at the start of 2013 appears to …
2nd April 2013
The latest batch of manufacturing PMIs in Emerging Europe shows that activity slowed across the board last month. Activity remains strongest in Turkey. But the weakness of the Central European readings, coming alongside signs that the German economy is …
The slowdown in the Turkish economy in Q4 of last year appears to be the trough, and our GDP tracker suggests that growth has picked up to around 2.5% y/y at the start of 2013. Nonetheless, the consensus’ expectation for growth of around 4% this year …
Most attention has focussed on the impact that the Cypriot bail-out could have on Russian depositors, but the deal may pose much bigger risks for Ukraine, which is already on the brink of a balance of payments crisis. … Don't underestimate Ukraine's …
28th March 2013
The loss to Russian investors from the levy on Cypriot bank deposits remains uncertain, but a plausible estimate is somewhere around €5bn. This is fairly small in the grand scheme of things and the levy itself is therefore unlikely to have a major impact …
Emerging market inflation has risen in recent months and is set to continue along this upward path in the near future. Looking further ahead, however, weak core price pressures combined with the fact that global food prices have fallen since last summer’s …
27th March 2013
The fact that Hungary’s new-look MPC did not lower interest rates by more than 25bps today underlines the extent to which policymakers are constrained by the threat of a sell-off in the financial markets and, in particular, the risk of a further weakening …
26th March 2013
Today’s cut in Turkey’s overnight lending rate is a cosmetic change, and doesn’t reflect an easing of policy. In fact, the central bank has tightened policy in recent weeks. And with domestic demand accelerating and external imbalances widening again, we …
The raft of weak activity data from Poland dents hopes that the economy turned the corner at the start of this year. With inflation set to remain below target, the National Bank is likely to resume its easing cycle unless there are signs of a pick-up in …
22nd March 2013
The latest activity data from Emerging Europe have been something of a mixed bag. Turkey is leading the recovery as a rebound in credit growth has fuelled domestic demand. Here, we think GDP growth accelerated to around 2.5% y/y in the first few months of …
21st March 2013
A raft of weak activity data for February puts a big dent in hopes for a rebound in the Russian economy in Q1. What’s more, there are further signs that the slowdown is being driven as much by structural as by cyclical factors. Accordingly, despite …
20th March 2013
Russia’s financial markets have taken fright this morning following the announcement of details of the Cypriot bail-out, which looks set to hit Russian deposits there hard. But despite the fact that Russian banks and companies stand to be among the …
18th March 2013
The appointment of the new governor at Hungary’s National Bank has created havoc. Investors have become unnerved at the prospect of drastic measures to boost the economy, leading to a fresh sell-off in the forint. We think the authorities are likely to …
The high rate of inflation continues to prevent the Central Bank of Russia from easing policy to support the slowing economy. But with inflation now close to peaking, interest rate cuts are possible over the coming months, and could come as soon as May’s …
15th March 2013
The decision by President Putin to nominate his economic advisor, Elvira Nabiullina, to be the next governor of the Central Bank of Russia is a blow to hopes for a more independent monetary policy over the coming years but is unlikely to lead to major …
12th March 2013
After a steady improvement over the past year, the narrowing of Turkey’s current account deficit stalled in January. What’s more, the latest data reveal an increasing dependence on short-term or “hot” capital inflows to fund the current account deficit, …
The breakdown of Q4 GDP data in Central and South Eastern Europe showed encouraging (albeit tentative) signs of an improvement in consumer spending. By contrast, exports were extremely weak. Leading indicators suggest that growth has probably accelerated …
11th March 2013
The rally in Emerging Europe’s financial markets has lost steam over the past few weeks. In part, this is due to the re-surfacing of tensions in the euro-zone following Italy’s inconclusive general election. But Hungarian financial markets have been …
7th March 2013
Today’s larger-than-expected cut in Polish interest rates means that we have probably reached the end of the easing cycle. But while some analysts are now suggesting that interest rates will be hiked within the next year, we expect rates to remain …
6th March 2013
Inflation in Russia rose to an 18-month high of 7.3% y/y in February but is now close to peaking. As it falls back over the coming months, interest rates are likely to be cut. Nonetheless, the room for aggressive easing is limited and we expect any rates …
5th March 2013
