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With attention fixed on every twist and turn in Hungary’s talks with the IMF, it’s easy to forget why the government first raised the prospect of assistance nine months ago. In short, while the fiscal position is not too bad, wider economic frailties and …
21st June 2012
Relative to the rest of the region the Russian economy remains in a decent shape, but the first signs of a slowdown are starting to appear. Our estimates suggest that growth eased to around 4.0-4.5% y/y in Q2 from 4.9% y/y in the first quarter. What’s …
The $40bn crisis package that press reports suggest is being prepared by the Russian government should allay fears of a repeat of 2008-09, when the Kremlin was accused of being behind the curve in the face of economic chaos. But at the same time, they …
19th June 2012
Manufacturing PMIs in Central Europe have weakened significantly over the past couple of months as the economic outlook has darkened. The one crumb of comfort, however, is that they have not fallen as far or as fast as the German surveys, which have …
Headline inflation fell pretty much everywhere in Emerging Europe in May on the back of easing food and energy inflation. Moreover, with the possible exception of Turkey, underlying price pressures are also subdued. Notably, core inflation dropped …
13th June 2012
It is probably too soon to judge whether or not Latvia’s internal devaluation has been a success. But the early signs do not suggest that it provides a model for the euro-zone’s crisis-hit periphery to follow. … Is Latvia a model for the euro-zone’s …
The crisis in the euro-zone continues to cast a long shadow over the outlook for Emerging Europe. Most countries are already feeling the effects of weaker export demand, and the very open economies in the region are now in recession. But our view that the …
12th June 2012
Final Q1 GDP data for Central and South Eastern Europe show that the slowdown across the region was driven by weaker domestic demand, with the exception of Slovakia. Meanwhile, exports proved surprisingly resilient – although we doubt that this can last. …
8th June 2012
Compared to 2008-09, Russia is now less vulnerable to financial contagion as a result of a fresh shock to the global economy (most notably from the euro-zone). But at the same time, Russia’s economy has become more dependent on high and rising oil prices. …
7th June 2012
May’s manufacturing PMI data provide further evidence – if any were needed – that the euro-crisis is hitting the economies of Emerging Europe. Industry already appears to be in recession in much of the region and with the latest data suggesting that the …
1st June 2012
First quarter GDP confirmed what we’ve known for a while: Poland is more resilient than her peers to the crisis in the euro-zone, but equally she is not immune. And with the euro-crisis deepening, a mini investment boom about to tail off, and household …
31st May 2012
There are several ways that, in theory, policymakers in Emerging Europe could limit any financial contagion arising from a disorderly break-up of the euro. But in practice, we suspect that building the necessary firewalls will be difficult. … What can …
Policymakers in both Hungary and Turkey kept rates on hold today, but clearly talk of looser policy to support growth is premature. … External financing risks resurface for Hungary and …
29th May 2012
The Euro 2012 Football Championships, which are due to start next month in Ukraine and Poland, are an exception to the general rule that major sporting tournaments do not tend to have a significant impact on economic growth in the host countries. However, …
28th May 2012
Emerging Europe’s financial markets have been battered over the past month amid growing fears of a disorderly Greek exit from the euro-zone. Equities are down by around 10% in most of the region, while local currencies have fallen by as much as 5% against …
24th May 2012
The recent sell-off in the zloty will make it harder for the Polish government to keep public debt from breaching constitutionally mandated ceilings. In the extreme, policymakers face the risk of entering a self-defeating cycle of austerity, even weaker …
The latest slump in the Hungarian forint has taken the currency to below 300/€ – the rate that, on past form at least, has triggered a response from the authorities. This time around, the response will probably come in the form of a renewed government …
23rd May 2012
The raft of activity data released today showed that the Russian economy made a decent start to Q2, with consumers remaining the main engine of growth. Meanwhile, the new cabinet, also announced today, suggests that we are unlikely to see a marked shift …
21st May 2012
The growing risk of Greece leaving the euro-zone has taken a heavy toll on Emerging Europe’s currencies. Most are now back at their lows seen in the autumn of last year. Looking ahead, there is clearly a lot of uncertainty, but a disorderly Greek exit …
18th May 2012
This week’s dismal first quarter GDP data will sharpen the debate over whether policymakers in Emerging Europe should pursue austerity or focus on growth. But in reality, while there is scope for one or two countries in the region to ease back on plans to …
17th May 2012
With a few notable exceptions, Emerging Europe’s direct exposure to Greece is small. But the contagion from a disorderly Greek exit from the euro-zone would have disastrous consequences for the region. … Greek exit risks …
15th May 2012
The raft of Q1 GDP data released today show that output in large parts of Emerging Europe was contracting even before the most recent escalation of the euro-crisis. … Q1 GDP data just the tip of the …
Slovenia’s debt problems are not as severe as those of other Southern European economies, but its public debt is nonetheless on an unsustainable footing. Moreover, given the backdrop of private sector deleveraging at home and recession in key export …
14th May 2012
Today’s balance of payments data from Turkey show that the current account deficit continued to narrow in March. It now looks like the economy is around half way through the rebalancing needed to bring the external deficit down to a sustainable level – …
11th May 2012
The raft of Q1 GDP data due to be released over the coming weeks will confirm that, having been on the brink of a crisis towards the end of last year, most economies in Emerging Europe have since stabilised. Unfortunately, the very latest survey data …
10th May 2012
The post-MPC press conference did not provide much clarity on whether this morning’s surprise hike in Polish interest rates was a one-off event or the start of a new tightening cycle. On balance, we suspect it was the former. In fact, we think there is …
9th May 2012
In his first speech since returning to the Russian presidency, Vladimir Putin underlined the need to shift towards a more liberal economic policy. We have been here before, of course, and we remain sceptical on the likelihood of actual reform. But …
It remains a close call, but we think that the weaker run of data over the past couple of weeks has tipped the balance in favour of Polish interest rates being kept on hold at next week’s MPC meeting. … Balance tips in favour of Polish rates staying on …
4th May 2012
After a boom and bust in domestic demand over the last decade, Bulgaria’s economy appears to be shifting towards export-led growth and away from over-reliance on domestic consumption. But the good news ends here. Close ties to the euro-zone periphery and …
3rd May 2012
The National Bank of Romania’s (NBR’s) decision to keep interest rates on hold today suggests that the easing cycle is on hold until the political situation (and the leu) stabilises. … Romanian rates on hold until politics …
2nd May 2012
April’s manufacturing PMIs suggest that industrial output in most of Emerging Europe contracted last month – mirroring the recent deterioration in the survey data from Germany. More worryingly, the forward looking aspects of the PMI surveys from much of …
Russia is unlikely to run large current account surpluses for much longer. But while her days as a ‘super saver’ nation look numbered, we are equally sceptical of Russia’s ability to sustain large current account deficits. Accordingly, any fall in oil …
The fall of Romania’s cabinet earlier today adds to the growing list of European governments to be toppled by a backlash against austerity, reinforcing our below-consensus forecast for growth this year. … Romania’s government falls victim to austerity …
27th April 2012
Recent data suggest that the Ukrainian economy slowed sharply at the beginning of the year. With the outlook for the euro-zone still bleak and the Russian economy on course to slow too, we think Ukrainian growth this year will fall well short of the …
26th April 2012
Financial markets across Emerging Europe have been hit by fresh concerns about the euro-zone debt crisis in recent weeks. So far at least, the sell-off in the region’s markets has not been as dramatic as that seen in the last few months of 2011. But with …
Signs that the European Commission (EC) is willing to be more lenient in its discussions with Hungary over a new IMF/EU financing programme suggest that an agreement could be reached more quickly than we had originally anticipated. However, we would …
25th April 2012
European shale gas reserves will take many years to develop, but in time the impact on Russia’s energy exports could be substantial. We estimate that Russia’s revenues from gas exports to Europe may ultimately fall by the equivalent of 1% of GDP, with …
20th April 2012
The financial markets have shrugged off signs that the Czech Republic may be heading towards fresh elections that could ultimately derail fiscal consolidation plans. This makes sense. For a start, the current government may still muddle through. And even …
19th April 2012
Earlier today we attended a meeting with Hungarian Minister of Economy, Zoltan Csefalvay. We left with the impression that, while the government talks a good game on the need for medium-term economic reforms, it underestimates the near-term challenges …
18th April 2012
Our latest Banking Heat Map paints a mixed picture: in some countries (notably Hungary and the Baltic States) credit continues to shrink, in others (Turkey) a boom in lending over the past year or so has hit the buffers and in one (Russia) credit growth …
17th April 2012
Fresh concerns about the Hungarian government’s willingness to accept the conditions for help from the EU and IMF have led to renewed tensions in its financial markets. Attention has focused on reforms (or lack of) to the controversial central bank law, …
16th April 2012
Headline inflation remains above-target in most of Emerging Europe. But inflation fell in several countries last month while core price pressures are subdued everywhere apart from Turkey. … Core inflation weakens in Eastern …
13th April 2012
The recent fall in Russia’s stock market from the highs seen in the middle of last year is all the more surprising given the strength of oil prices. With economic growth set to slow, hopes for much-needed reform likely to fade and the risks to oil prices …
The early indications are that Russia’s economy grew by around 4.5% y/y in the first quarter of this year, making it one of the region’s best performers. Unfortunately, sustaining this pace of growth over the rest of this year will prove difficult. … …
12th April 2012
February’s current account data show that the rebalancing of the Turkish economy is progressing more smoothly than we had feared. At its current rate of progress, it will still take another 18 months or so to bring the current account deficit onto a …
11th April 2012
The introduction of Hungary’s early FX mortgage repayment scheme last September was one in a chain of events that severely dented market confidence in local policymaking and sent the economy to the brink of crisis late last year. Although the scheme has …
5th April 2012
Polish policymakers left interest rates unchanged this afternoon, but Governor Belka’s subsequent remarks that the MPC were “seriously” considering raising rates has triggered a sell-off in the bond market, particularly at the short end of the curve. We …
4th April 2012
The relatively modest drop in steel prices that we expect later this year would not be a game-changer for Ukraine, but it would exacerbate growing strains in the balance of payments and public finances. … Ukraine: downside risk to steel prices adds to …
3rd April 2012
The deceleration of the Turkish economy in Q4 was not as bad as we had feared. However, the strength of net exports masked a much sharper slowdown in domestic demand – a process which has much further to run in order to bring down Turkey’s huge gaping …
2nd April 2012
The manufacturing PMIs for March add to recent data suggesting that, while conditions in Emerging Europe are slowly improving, growth in Q1 of this year was still pretty lacklustre. The sharp jump in Hungary’s PMI stands out, but it is worth bearing in …
