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Events during the first few days of Gyorgy Matolcsy’s Governorship of Hungary’s central bank reinforce concerns about the Bank’s independence. At the very least, we are likely to see further interest rate cuts over the coming months. But it looks …
5th March 2013
The development of shale gas in Europe is unlikely to have a significant impact on Russia’s energy exports over the next couple of years. But in time, it could prove to be the final nail in the coffin of Russia’s commodity-based growth model. From …
4th March 2013
The turnaround in the latest Polish data suggests that weak GDP growth in Q4 could mark the trough of the economic slowdown. This will no doubt lead to speculation that the National Bank’s easing cycle could come to a halt. For our part, we think the fact …
1st March 2013
The decision to nominate Economy Minister Gyorgy Matolcsy to become Hungary’s new central bank governor is another blow to the Bank’s independence and is likely to result in further interest rate cuts and possibly unconventional policies to boost lending. …
February’s PMI data add to recent evidence that the slump in Emerging Europe has bottomed out and that growth in the first quarter of this year should be an improvement on the final quarter of 2012. Turkey is still leading the way but there are also signs …
GDP data released over the past month showed that growth in Emerging Europe slumped to a postcrisis low of just 0.8% y/y in the final quarter of last year. Nonetheless, the latest surveys suggest that the region has now started to turn the corner. Turkey …
28th February 2013
Emerging market (EM) inflation looks to have found a floor in late 2012 and is set for a modest rebound over the first half of this year. Food inflation is likely to pick up in the coming months and there are also signs that core price pressures are …
27th February 2013
Growth in Emerging Europe sank to a post-crisis low in the final quarter of 2012 but the latest surveys suggest that the outlook has brightened a little since the turn of the year. We expect growth to accelerate over the first half of the year, but the …
The impending change at the helm of Hungary’s central bank will lead to further cuts in interest rates over the coming months. But the scope for easing will be determined in large part by whether global risk appetite holds up. If sentiment turns, either …
26th February 2013
Rising employment has been one of the few bright spots for the recession-stricken Hungarian economy. But this merely reflects the weakness (indeed absence) of labour productivity growth. And as long as labour productivity growth remains subdued, Hungary …
20th February 2013
The raft of activity data for January suggests that the slowdown in the Russian economy deepened at the start of this year. But while this will add to pressure on the Central Bank to start easing policy, we think rate cuts are still unlikely until …
19th February 2013
Although the Turkish central bank cut interest rates today, it also raised reserve requirements, so the overall impact on monetary conditions is ambiguous. The key point is that policymakers are in a Catch-22 whereby they are coming under pressure to cut …
The dire set of Q4 GDP data released across Central & South Eastern Europe over the past week or so has led to obvious questions as to how the region is being affected by the crisis in the euro-zone. The data suggest that the problems in the single …
18th February 2013
The raft of Q4 GDP data released today for Emerging Europe suggests that growth in the region sank to a post-2009 low of 0.8% y/y. An improvement in sentiment within the euro-zone should feed through to a pick-up in growth in Emerging Europe the first …
14th February 2013
The sharp slowdown in Russian growth towards the end of last year has drawn attention away from a much more important point: namely that it was driven by a slump in investment. In this month’s Watch we explain why raising investment is now more important …
13th February 2013
The Central Bank of Russia (CBR) kept its benchmark interest rates on hold today and signalled that, despite growing pressure from the government to ease policy, any move in rates in either direction is unlikely in the near future. This reflects the fact …
12th February 2013
The appreciation of Turkey’s real exchange rate has raised speculation that monetary policy could be loosened to weaken the lira. However, the most effective way to improve Turkey’s export competitiveness would be to reduce inflation, which is high by …
8th February 2013
This is the first edition of our new monthly Emerging Europe Markets Monitor . The purpose of this publication is to analyse the developments in local markets over the past month and give an update on our key forecasts. Equity markets in Emerging Europe …
7th February 2013
Policymakers in both Poland and the Czech Republic are becoming more optimistic about the economic outlook. But even so, we still expect a further cut in Polish interest rates next month. And while the Czech National Bank has scotched hopes of a move to …
6th February 2013
Russian inflation picked up to its fastest rate since late 2011 in January, giving the Central Bank a strong argument to withstand pressure from the government to start easing policy in the face of slowing growth. … Russia: pick-up in inflation rules …
5th February 2013
The continued improvement in sentiment towards the euro-zone has simultaneously eased external funding conditions for Emerging Europe’s banks and reduced the threat of financial contagion from the euro-zone debt crisis. Even so, banking systems in large …
4th February 2013
The latest batch of manufacturing PMI data from Emerging Europe provide the first signs that the region’s economy is turning around. However, for now at least, the recovery appears to be concentrated in Turkey and, to a lesser extent, Russia. Meanwhile, …
1st February 2013
Having dropped to a near-three-year low, EM inflation looks to have now bottomed out. Inflation is likely to rise further in the near term due to strengthening demandside pressures and increases in commodity prices. But the pick-up is unlikely to be …
Preliminary data showing that Russia grew by a solid 3.4% in 2012 masks the fact that the economy slowed fairly sharply over the course of the year and is now growing by around 2% y/y. The recent improvement in the global outlook suggests that the economy …
31st January 2013
The outlook for Emerging Europe has brightened considerably at the start of the year. Equities have rallied while the latest survey data from key euro-zone export markets have picked up markedly. However, so far at least, there has been little evidence to …
30th January 2013
Hungary’s external vulnerabilities mean that the scope for further interest rate cuts will depend on the forint holding up. The bigger picture, however, is that even if policy is eased further, frailties in the banking sector mean that rate cuts will do …
29th January 2013
Preliminary data showing that Poland’s economy grew by 2.0% in 2012 masks a slump in domestic demand towards the end of last year that has seen household spending growth drop to its slowest rate since the early 1990s. This strengthens the case for further …
While most emerging markets staged a recovery in the final months of 2012, Russia appears to have bucked the trend. The latest raft of activity data suggests that growth weakened to just 2% y/y in Q4, meaning that the economy probably grew by 3.5% in 2012 …
25th January 2013
There is a growing sense in the markets that the Polish National Bank could pause its easing cycle next month, but given the weakness of the most recent data, we think the case is less clear cut. For now, we have pencilled in a 25bp interest rate cut next …
24th January 2013
Although the Turkish central bank cut some of its key interest rates today, this doesn’t necessarily amount to monetary easing. In fact, we think there is little scope for falls in market interest rates and, if anything, policy is likely to tighten over …
22nd January 2013
Modest upward revisions to our (below consensus) forecast for oil prices this year do not radically alter our view on the economic outlook for Russia. The budget deficit is likely to be slightly smaller than we had originally expected, while the current …
The Bulgarian economy is in the middle of a lost decade. A lack of competitiveness against the backdrop of a fixed exchange rate, coupled with the country’s close proximity to the euro-zone’s weakest economies means that growth is set to remain extremely …
17th January 2013
Some commentators are starting to question the extent to which Russia has moved towards greater currency flexibility in recent years. We see little to justify these doubts. Improving global sentiment means that the ruble is likely to strengthen over the …
16th January 2013
Amid the public spat over who exactly is responsible for the recent sell-off in the Hungarian forint, the point that is being overlooked is that local factors, rather than global risk appetite, now appear to be driving the currency. With fears mounting …
15th January 2013
The Central Bank of Russia left its benchmark interest rates on hold this morning as was widely expected. More importantly, the tone of the accompanying statement reveals that the Bank has become increasingly worried about the recent economic slowdown and …
The appointment of Hungary’s new central bank Governor, due to be announced next month, has the potential to shatter the recent calm in the local financial markets. In this Watch , we assess the potential candidates for Governor and explain why we think …
10th January 2013
Polish interest rates will be reduced further over the coming few months but, for now at least, the stabilisation of the economy in the final quarter of last year appears to have dissuaded the MPC from cutting by more than 25bps at a time. … Polish …
9th January 2013
A spat towards the end of last year over the true scale of capital flight from Russia risks missing the bigger picture, which is that capital continues to flow out of the country in the first place. Most other large EMs experience significant inflows . …
8th January 2013
In spite of the recent easing in financial market tensions, there is little scope for Romanian policymakers to cut interest rates to support growth. As such, we think the economy is likely to flatline this year. … Little room for policy stimulus in …
7th January 2013
Turkey’s hefty external financing requirement makes it one of the most exposed economies in the emerging world to a fresh global shock, the most likely of which is a renewed escalation of the euro-crisis. Given our views on Europe, we therefore remain …
4th January 2013
The latest manufacturing PMI data suggest that industry in Emerging Europe is still stagnating. There are signs that activity in Turkey is accelerating, but this is being offset by further weakness in the highly open economies of Central Europe …
2nd January 2013
Emerging Market (EM) inflation slowed to a near-three-year low in November. Fears of a food-led inflation shock this year have proved to be misplaced, as we had expected. While inflation is likely to rise in early 2013 as a result of past increases in …
20th December 2012
Policymakers in Hungary and Turkey cut interest rates today as the general improvement in global risk appetite in recent months has reduced concerns over external vulnerabilities and allowed the authorities to focus on shoring up growth. But these …
18th December 2012
Growth across Emerging Europe has continued to slow in recent months and is likely to remain extremely weak in 2013. Official data suggest that the region grew by less than 2% y/y in the third quarter and our own GDP tracker suggests that the pace of …
17th December 2012
Inflation is falling sharply across Central and South Eastern Europe and we expect this to continue into next year. This should encourage further policy stimulus in the Czech Republic and Poland, although in Hungary there is less room for manoeuvre. … …
13th December 2012
Concerns are mounting that Turkey will be faced with a fresh wave of “hot” capital inflows. As it happens, we don’t think this is a credible threat – we expect a fresh escalation of the euro-crisis to cause capital inflows to dry up (again). But it is the …
12th December 2012
The Central Bank of Russia (CBR) left its benchmark lending rates on hold today, but hiked its overnight deposit rate by 25bps. Given the liquidity shortage in the interbank market and the fact that money market rates are well above the CBR’s deposit …
10th December 2012
The latest data from Turkey paint a pretty gloomy picture: Q3 GDP was weaker than expected and October’s industrial production figures suggest that the economy has made a poor start to Q4. The central bank is under pressure to cut interest rates but a …
The detailed Q3 GDP data for Central and South Eastern Europe make pretty grim reading. We fear that the slowdown in both domestic demand and exports may be a sign of things to come. … Q3 GDP growth hit by weak domestic …
7th December 2012
The run-up to Romania’s parliamentary election on Sunday has been surprisingly quiet. But we think the markets may be underestimating the risk of fresh turbulence following the vote. … Romanian elections to put leu under …
6th December 2012
