Filtered by Subscriptions: Emerging Europe Economics Use setting Emerging Europe Economics
For now, the Polish monetary easing cycle is progressing in 25bp steps, but we think the economy is set to slow further over the coming months which, ultimately, could trigger larger rate cuts by early next year. Either way, we think interest rates will …
5th December 2012
November’s PMIs were a positive surprise for Central Europe, where it looks like the manufacturingsector stabilised. Elsewhere, signs that Turkey’s exports may be flat-lining are worrying as they mean thatthe process of current account adjustment may have …
3rd December 2012
Q3 GDP data confirmed that the Polish economy has slowed sharply and with mounting external and domestic headwinds, we think growth will weaken further to just 1.0% in 2013. Accordingly, we expect interest rates to be cut by more than the markets have …
30th November 2012
A raft of recently released Q3 GDP data for Emerging Europe paints a pretty gloomy picture. The Czech and Hungarian economies are still stuck in recession, while even the region’s better performers – Russia and Slovakia – slowed sharply. Altogether, we …
29th November 2012
The improvement in global risk appetite has provided Hungary’s National Bank with the scope to loosen policy. But persistent financial vulnerabilities mean that, without an IMF deal in place, the Bank could be forced into rate hikes to defend the forint …
27th November 2012
Emerging Market (EM) inflation slowed in October. Even if inflation does pick up again in the coming months as a result of past increases in commodity prices, the big picture is that any rise is likely to be small and short-lived. … Inflation slows, …
23rd November 2012
A strong labour market combined with low and stable mortgage rates have not been able to prevent a small rise in mortgage arrears. Possessions are currently being kept low by continued lender forbearance. … Slowdown has further to …
22nd November 2012
At today’s MPC meeting, the Turkish central bank highlighted that it is becoming increasingly concerned about “hot” capital inflows and signalled that these could be countered with aggressive policy loosening in the coming months. However, insomuch as …
20th November 2012
Following last week’s disappointing GDP release, which showed that the economy slowed to just 2.9% y/y in Q3, the raft of activity data for October suggests that the slowdown has continued in Q4. We think growth is on course to ease further to just 2% in …
Tomorrow marks the first anniversary of the start of Hungary’s negotiations with the IMF. Unfortunately, we are no closer to a deal now than we were then. For the time being, the markets don’t appear to be attaching much weight to Hungary’s progress. But …
16th November 2012
Third quarter GDP data for Central and Eastern Europe make for pretty grim reading. Output contracted on a quarterly basis in three of the five countries that reported figures and the business surveys suggest that things are unlikely to improve in Q4. … …
15th November 2012
The upgrade to Turkey’s credit rating last week came in spite of the fact that there has been little underlying improvement in its sizeable current account deficit. This leaves the economy exposed to a fresh deterioration in investor risk appetite. … …
14th November 2012
A restructuring of local government debt in Hungary is by no means certain and, even if it did occur, would entail smaller losses for the banking sector than a similar restructuring of private sector debt late last year. But even so, the very fact that it …
13th November 2012
The Central Bank of Russia kept its key interest rates on hold today and the accompanying statement suggests that any change in rates is unlikely in the very near-term. We still think that policymakers will move into easing mode next year, but the scope …
9th November 2012
Third quarter GDP data, which are due to be released by most countries over the coming month, are likely to make fairly grim reading. We estimate that regional growth slowed to around 1.5-2.0% y/y in Q3, and the early signs are that Q4 is unlikely to be …
8th November 2012
Today’s decision by the National Bank of Poland to cut interest rates by 25bps to 4.50% suggests that policymakers are finally starting to acknowledge that the big threat to the economy comes from weakening growth, not high inflation. We expect at least …
7th November 2012
Today’s decision by Fitch to raise Turkey’s sovereign debt rating to investment grade is likely to have only a limited impact on financial markets since the move seems to have already been priced in by investors. … Turkish upgrade unlikely to be a game …
5th November 2012
Turkish equities have risen by over 40% since the start of the year, but we think that macroeconomic frailties and weaker global risk appetite could bring this rally to an abrupt end. … Turkish stock market rally looks …
2nd November 2012
After today’s decision to cut interest rates all the way to the zero bound, we expect the Czech National Bank to move into the realms of unconventional monetary policy measures next year. … Czech Republic moves to the zero …
1st November 2012
The latest PMIs show that manufacturing in the highly open economies of Central Europe remains in recession due in large part to falling external demand. By contrast, the Turkish PMI data provide early hopes that the economy may have accelerated towards …
Hungary continued to cut interest rates today, but financial vulnerabilities and a lack of progress towards an IMF deal mean that there is limited room for further easing. Accordingly, we don’t think that interest rates will fall as far as the market …
30th October 2012
Russia’s draft budget for 2013-15 implies that fiscal policy will become far more restrictive over the next three years. But it is doubtful that the government will be able to stick to its plans to constrain spending. And even if it does, this will only …
With 70% of the vote now counted, Ukraine’s ruling coalition looks likely to maintain its majority in parliament (although by a dangerously thin margin). The good news is that the election has so far passed smoothly, and political instability has been …
29th October 2012
The slowdown across Emerging Europe has intensified in recent months. We reckon that the region’s economy expanded at an annual pace of around 1.5-2.0% in Q3, down from 2.5% in Q2 and an average of 4.8% in 2011. Worryingly, the slowdown appears to have …
26th October 2012
There are tentative signs that the slowdown in Emerging Market (EM) inflation seen over the past year has bottomed out. We expect EM inflation to quicken over the next six months, mainly due to faster food inflation. Nonetheless, a repeat of the food-led …
25th October 2012
Earlier today we attended a meeting with Hungarian Minister of Economy, Zoltan Csefalvay. We left with the impression that the government’s plans for deficit reduction are still too optimistic and that we are no nearer to an IMF deal being agreed. … …
Having accelerated towards the end of last year, capital outflows from Russia have eased in recent quarters. Nevertheless, they remain substantial. And with the Central Bank now forecasting a current account deficit from 2015, Russia’s balance of payments …
22nd October 2012
Ukraine’s large external financing requirement and its heavy dependency on industrial exports to Western Europe make it among the most vulnerable countries in Emerging Europe to a re-escalation of the euro-crisis. This, coupled with the potential for …
19th October 2012
Today’s decision by the Central Bank of Turkey (CBRT) to cut its overnight lending rate – which forms the upper bound of its “interest rate corridor” – is a largely symbolic move that is most likely aimed at placating government ministers that have …
18th October 2012
The latest monthly activity data suggest that the Russian economy is now in the midst of a fairly sharp slowdown. We reckon that GDP growth slowed to around 2% y/y in Q3, from 4% y/y in Q2, and that worse is to come in Q4. This should temper expectations …
17th October 2012
The hikes in indirect taxes announced by the Turkish government over the past few weeks will not prevent inflation from falling further towards the end of this year. But even so, current account concerns mean that there is little room for monetary policy …
16th October 2012
A surge in gold sales to crisis-hit Iran has played a significant role in reducing Turkey’s current account deficit over the past year. However, gold sales alone are unlikely to bring Turkey’s external deficit down to a sustainable level, and we continue …
15th October 2012
The latest data suggest that parent banks in Western Europe have continued to scale back funding to subsidiaries in the east, with those in Hungary hit disproportionally hard. … Parent bank deleveraging rumbles …
12th October 2012
Russia stands out as the only economy in Emerging Europe currently experiencing rapid credit growth. In fact, the Central Bank is starting to worry about the risks of a credit bubble developing. We share some of its concerns but think that mounting …
10th October 2012
The raft of amendments to Hungary’s 2013 budget announced late last week contained not only fresh austerity measures, but also amended contentious policies that had previously been an obstacle to an IMF deal. As such, it has received cautious approval …
9th October 2012
The decision by the Central Bank of Russia to keep interests rates on hold at 8.25% was expected, but the accompanying statement revealed a subtle yet important shift in tone, with policymakers now placing more emphasis on downside risks to growth and …
5th October 2012
The forecast by the Central Bank of Russia that the economy will run a current account deficit by 2015 is significant insofar as it represents the first official acknowledgment of something we’ve been arguing for a while – namely that Russia’s oil-fuelled …
4th October 2012
The decision by the National Bank of Poland to leave interest rates on hold today suggests that policymakers want to see further evidence of a slowdown in the economy before easing policy. We doubt they will have to wait for very long, and continue to …
3rd October 2012
The pick-up in the manufacturing PMI for Russia and Turkey last month is good news, although the survey still suggests that industrial production in both countries stagnated in quarterly terms in Q3. That would, however, be a markedly better outcome than …
1st October 2012
Central banks in Emerging Europe are starting to respond to the economic downturn that has spread across the region. Interest rates were cut this month in the Czech Republic, Hungary and Turkey, and policymakers in Poland looks set to follow suit over the …
28th September 2012
The Czech National Bank cut interest rates to just 0.25% earlier today and suggested that, should further stimulus be necessary, this would probably take the form of intervention in the foreign exchange markets to weaken the koruna. We don’t expect an …
27th September 2012
Hungary cut interest rates again today, but a combination of familiar financial vulnerabilities and a failure to make meaningful progress on an IMF deal means that the room for further significant cuts to support growth is limited. By contrast, Polish …
25th September 2012
The Czech National Bank is likely to cut interest rates to a fresh record low later this week. But it is quickly running out of room for conventional policy responses to lift the economy out of recession. And with activity set to remain subdued on the …
The Russian authorities have raised the prospect of export bans on grains to contain local food inflation. But past experience suggests that such moves have had little impact on domestic prices, and in any case a repeat is unlikely to prevent inflation …
24th September 2012
Financial markets are unlikely to be spooked by signs of fiscal slippage in Poland – compared with the rest of Europe, the government’s finances are a picture of health. In fact, we think bond yields are likely to fall further over the next six months or …
20th September 2012
August’s raft of activity data confirm that the Russian economy is running out of steam – in the first two months of Q3 growth appears to have slowed to its weakest pace in two years. With limited room for a fiscal boost following a pre-election spending …
19th September 2012
The recent news that the ECB is prepared to buy “unlimited” quantities of peripheral government bonds has reduced the risk that banks in Emerging Europe will be hit by financial contagion from the eurozone. But familiar vulnerabilities in the region’s …
Today’s cut in the Turkish overnight lending rate is partly cosmetic and the impact on domestic demand is likely to be limited. We wouldn’t rule out a few more steps to narrow the “interest rate corridor” over the coming months, but ultimately high …
18th September 2012
The surprise decision this afternoon by the Central Bank of Russia (CBR) to hike interest rates reflects growing concerns over rising inflation among policymakers. Another hike in rates is possible by the end of the year, but we think the Bank could be …
13th September 2012
Although Turkey’s current account deficit has started to narrow, short-term external debt – particularly in the banking sector – has risen sharply over the past couple of years. As such, Turkey remains among the most vulnerable emerging markets to a fresh …
12th September 2012
