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The recent revision of Russia’s tariff system as part of its WTO accession is unlikely to have a marked impact on inflation, which is still on course to breach the Central Bank’s end-year target of 5-6%. … WTO tariff reductions will have little impact on …
11th September 2012
Q2 GDP data showed that while domestic demand is still contracting, a boom in exports has kept the Turkish economy out of recession. Admittedly, it looks like the economy has weakened in Q3, while concerns about a large external financing requirement …
10th September 2012
Final Q2 GDP data confirmed that weak domestic demand was the main drag on growth in Central and South Eastern, coming on the back of fiscal austerity and falling confidence. But with external headwinds mounting, we think growth is set to slow further …
7th September 2012
Today’s statement by Hungarian PM Victor Orban that his government will reject the conditions attached to an IMF programme is unlikely to spell the end of negotiations between the two parties, but it is likely to result in a sell-off in the forint and …
6th September 2012
Policymakers in Russia are likely to find themselves in something of a bind over the coming months – while growth is starting to slow, inflation looks set to accelerate. For now it seems that inflation concerns will dominate the debate, and we would not …
Today’s post-MPC press conference gave the clearest sign yet that the National Bank of Poland (NBP) is set to start cutting interest rates in order to counter the recent downturn in the economy. We now expect a 25bp cut in rates at next month’s MPC …
5th September 2012
While manufacturing in Emerging Europe does not seem to have collapsed to the same extent as in Western Europe, August’s PMIs remain at levels consistent with a recession in industry in Poland and the Czech Republic and strengthen the case for policy …
3rd September 2012
A raft of GDP data released this month showed that growth slowed across most of Emerging Europe in the second quarter. Hungary and the Czech Republic were the worst performing economies, as both sank further into recession. And even the region’s most …
30th August 2012
Poland remains one of Emerging Europe’s strongest performing economies. But a sharper-than-expected slowdown in Q2 means that it is looking likely that the National Bank will cut interest rates by more than most analysts anticipate over the coming 12 …
In the past few months, the Turkish central bank has added to its policy toolkit by allowing banks to hold foreign currencies and gold in place of lira as required reserves for their lira liabilities. In this Update, we examine the reasons behind this …
29th August 2012
The National Bank of Hungary’s surprise decision to cut interest rates today suggests that further easing could be on the way. But unless and until an IMF/EU deal is agreed, anything more than a further one or two 25bp cuts looks unlikely. … Hungary cuts …
28th August 2012
The slowdown in Emerging Europe in recent months is a sign of things to come, and we expect a number of countries to spend the next year in recession. The most obvious concern on the horizon remains the rolling crisis in the euro-zone, which, despite …
23rd August 2012
July’s activity data, released earlier today, suggest that the Russian economy slowed further at the start of Q3 and may now be growing at around 3% y/y – down from rates of close to 5% in the first quarter of this year. More importantly, there are signs …
20th August 2012
The ruble has been on a rollercoaster ride of late, falling by 10% against its dollar/euro basket in May, before clawing back around 5% of its losses over the past few weeks. If nothing else, this underlines the extent to which the currency has become far …
17th August 2012
The pick-up in food inflation in Emerging Europe is likely to raise fears that the recent spike in global agricultural prices is starting to hit the region. There is a fair amount of uncertainty, but assuming that food prices don’t rise from here on, food …
14th August 2012
Today’s Q2 GDP data paint a picture of weakening growth, with Hungary joining the Czech Republic in recession. For now, the drop in output in both countries seems to have been driven as much by domestic austerity as by weaker export demand from Europe. …
The National Bank of Romania (NBR) appears to have stepped up intervention in the FX market to defend the leu following the recent bout of political turmoil. For now, FX reserve coverage looks adequate and the NBR can probably continue to intervene at its …
13th August 2012
Q2’s GDP data provide the first sign that the impressive bounce in growth in the Baltic States is coming to an end. Growth decelerated in Latvia and slowed to a crawl in Lithuania and Estonia. A weaker external environment, coupled with still fragile …
10th August 2012
The slowdown in Russian GDP growth in Q2, though modest, is likely to be a sign of things to come. Accordingly, speculation that the Central Bank may soon hike interest rates seems premature. … Russian bank turns hawkish despite slowdown in …
Emerging European bonds have rallied over the past couple of months. In the case of Hungary and Turkey we are doubtful that it can be sustained, but in the Czech Republic and Poland, it may have further to run. … Can the bond rally …
9th August 2012
We are among the most bearish forecasters on the near-term prospects for Emerging Europe and expect the region to underperform the rest of the emerging world over the next couple of years. But looking further ahead the outlook is much brighter. Indeed, …
8th August 2012
Although the Czech National Bank (CNB) left interest rates on hold today, we think the weakness of the economy could prompt one further 25bp rate cut before the end of this year. … Czech Bank could cut rates once more this …
2nd August 2012
The latest manufacturing PMIs suggest that while industrial output in Emerging Europe has not collapsed to the same extent as in the euro-zone, neither is it growing. The authorities will become increasingly focussed on reviving growth, but in truth only …
1st August 2012
With the Polish economy slowing and inflation set to fall, we have revised our interest rate forecast and have now pencilled in 100bps of rate cuts (to 3.75%). This would suggest that the recent rally in Polish bonds has further to run. … Polish interest …
31st July 2012
Signs that Hungary’s government is softening its stance on the precise form of financing assistance it is negotiating with the IMF is clearly good news. But there are still plenty of stumbling blocks to a deal being agreed. We fear the recent rally in the …
30th July 2012
Paradoxically, the apparent survival of Romania’s President in Sunday’s referendum could pave the way for a protracted period of political instability. This is likely to take its toll on the financial markets over the coming months, possibly causing the …
Deepening problems in the euro-zone continue to take their toll on Emerging Europe. Most of the region’s economies appear to have weakened in Q2. Even the region’s strongest performers, Russia and Poland, are starting to see the first signs of a slowdown. …
27th July 2012
The raft of recently released data from Poland suggests that GDP growth may have slowed to around 3.0% y/y in Q2, down from 3.5% y/y in Q1. And we suspect that growth in the second half of the year will weaken further, opening the way for interest rate …
26th July 2012
Today’s Q2 economic report by the Russian Ministry of Economy confirmed an earlier forecast that GDP grew by 3.9% y/y in the second quarter, down from 4.9% y/y in Q1. We fear the slowdown may be a sign of things to come. … Russia: Q2 slowdown a sign of …
25th July 2012
The strength of Polish consumer spending over the past couple of years has only been made possible by a run-down in the household savings rate. But with the savings rate now at a record low and real income growth likely to remain subdued, we think that …
24th July 2012
While keeping interest rates on hold today, Turkey’s central bank is maintaining its policy of gradually easing monetary conditions. But given the combination of a still-large current account deficit and a sharp rise in short-term external debt, we would …
19th July 2012
After almost 20 years of negotiations, Russia’s membership in the WTO at last seems imminent. But as the effects of this will be spread over several years, we do not expect a significant impact on the economy in the immediate future. What’s more, in the …
June’s raft of activity data confirmed that strong growth in the first quarter of the year is likely to be the high watermark for the Russian economy in 2012. We think growth slowed to around 4.0% in Q2. What’s more, the economy is on course to slow even …
18th July 2012
At first glance, it looks like the tide is turning towards looser monetary policy in Emerging Europe. But while there may be one or two rate cuts over the coming month, we wouldn’t get carried away. With the exception of Poland, there is little room for …
16th July 2012
Although inflation rose across Emerging Europe last month, our estimates suggest that core price pressures remain weak. As a result, above-target headline inflation should present little barrier to policy easing across the region. … Core inflation still …
13th July 2012
The Central Bank of Russia (CBR) left its benchmark refinancing rate on hold at 8.00% today, citing robust economic performance and that inflation is within the target range. Looking ahead, we think growth will slow sharply in the second half of this …
With the temporary boost to consumer spending from the Euro 2012 Football Championship now over, Ukraine has to get back to reality. Significant external financing needs continue to cast a long shadow over the outlook for Ukraine, making it among the most …
10th July 2012
The draft budget for 2013, 2014 and 2015 submitted last Friday offers some hope to Russia’s ailing public finances by aiming to reduce the budget’s vulnerability to swings in oil prices. Nevertheless, we fear that the measures are likely to be a damp …
9th July 2012
The Romanian parliament’s vote to impeach the President leaves the country clouded by uncertainty and casts doubts on the future of the country’s IMF/EU programme. This is likely to keep the leu and bond yields under pressure – in the short-term at least. …
The passage of Hungary’s new Central Bank Act has lifted the last obstacle to the start of negotiations with the IMF and European Union. But this is merely the beginning. Numerous issues will need to be ironed out before a deal is concluded, and we doubt …
6th July 2012
A combination of slowing inflation and disappointing Q1 GDP data has led to speculation that the Central Bank of Turkey (CBRT) might start to loosen monetary policy. We are sceptical. With the current account deficit still around 9% of GDP, downside risks …
Turkish Q1 GDP data showed that the economy has so far avoided the hard landing that we had feared. What’s more, leading indicators point towards a modest improvement in Q2. Nonetheless, with the current account deficit still large, Turkey remains one of …
2nd July 2012
June’s PMI data provide further evidence that manufacturers in the highly open economies of Central Europe are being hit hard by the crisis in the euro-zone, while those in Russia and Turkey are faring a little better. Even so, in the case of Turkey, a …
We estimate that planned hikes in Russian utility tariffs next month and again in September will add a total of around 2.0%-pts to headline inflation, pushing it to 6.5% by the end of the year. The subsequent impact on real incomes is one of the reasons …
29th June 2012
Czech policymakers have finally responded to the deteriorating growth outlook by cutting interest rates to a record low today. But with little scope for more conventional policy stimulus, we think they may soon resort to unconventional measures – namely …
28th June 2012
The economic and financial effects of a limited break-up of the euro-zone could knock some 2-3% off the level of Emerging Europe’s GDP by the end of 2013. But a bigger, more disorderly, break-up would have much more damaging effects, perhaps knocking 4-5% …
27th June 2012
Signs that the Polish economy is slowing should quell calls for rate hikes over the coming months. But growing troubles in the euro-zone mean that interest rate cuts are likely to come back on to the agenda more quickly than many expect – particularly if …
26th June 2012
This month’s data brought further evidence – if any were needed – that the euro-crisis is casting a long cloud over Emerging Europe. Business surveys have deteriorated further, suggesting that growth has slowed pretty much everywhere. Even in Russia and …
The Turkish MPC shifted slightly towards easing mode at today’s meeting. Nonetheless, with the current account deficit still large and a sharp rise in short-term external debt, we expect monetary policy to remain tight for the foreseeable future. … …
21st June 2012
