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This weekend’s breakdown in talks between the Hungarian government and the IMF rounds off a dire start for the new Fidesz government. While Hungary can get by without IMF funds for now, Hungarian financial markets look set for an extremely rough ride over …
19th July 2010
Most countries in the region are on the road to recovery, but the large amount of spare capacity created by last year’s recession means that on the whole the outlook for inflation remains extremely benign. While inflation did edge up in Hungary and Poland …
16th July 2010
The Turkish economy is currently undergoing a rapid rebound, and its near-term outlook is the brightest in Emerging Europe. We expect GDP to grow by 6.5% this year, and while the recovery is likely to lose some steam over the next six to twelve months, we …
15th July 2010
Today’s announcement that Ukraine will raise consumer gas prices by as much as 50% from 1st August suggests that the government is serious about the reforms needed to keep the country’s IMF programme on track. But while this is clearly a positive …
14th July 2010
The economies of Central Europe may be on the road to recovery but the large amounts of spare capacity created by last year’s recession means that the outlook for inflation remains extremely benign. Inflation edged up in Hungary and Poland last month, but …
13th July 2010
Despite repeated warnings from Russia’s inflation hawks, price pressures in Emerging Europe’s largest economy have continued to abate. We expect disinflationary forces to dominate for a while, although a more flexible exchange rate remains the key to …
8th July 2010
Today’s news that Hungarian industrial production grew by a massive 5.4% m/m in May could be another sign that a weaker euro is actually helping manufacturers in Central and Eastern Europe (CEE). But even if it is, and despite the fact that we expect the …
7th July 2010
The financial markets’ luke warm endorsement of Ukraine’s new IMF deal is probably justified. While a new IMF programme is good news in theory, in practice its success will depend on whether or not it can act as a spur for much-needed, but deeply …
5th July 2010
The latest manufacturing PMIs from across Emerging Europe suggest that the impressive rebound seen in the industrial sector will continue over the coming months. However, with domestic demand still subdued, the current industry-led recovery in the region …
1st July 2010
A sharp sell-off over the past few days has capped a tough first half of the year for the region’s equity markets. The good news is that valuations now look cheap, pointing to a period of outperformance once appetite for riskier assets starts to recover. …
Q1 2010 GDP data from Turkey reaffirm our view that it will be the best performing economy in the region over the next year or so. However, while the pace of recovery should continue to impress in the near term, familiar vulnerabilities are starting to …
30th June 2010
This morning’s ruling by the Romanian Constitutional Court against planned cuts to state pensions deals a blow to the government’s austerity programme. While much remains uncertain, it seems unlikely that the IMF board, which is due to meet early next …
25th June 2010
If the recent experience of the Baltic States offers any lessons for policymakers in the West it is that aggressive fiscal consolidation at a time when the private sector is also retrenching is likely to lead to much weaker levels of activity and a surge …
23rd June 2010
There are increasing signs that Hungarian policymakers have reached the end of the monetary easing cycle. But with the economy facing a tough time over the coming years, inflation pressures will be extremely weak and interest rate hikes remain a distant …
21st June 2010
Marek Belka was recently sworn in as the new President of the National Bank of Poland, and his impressive credentials as a former head of the IMF’s European Department make him a safe pair of hands who will play well with the markets. However, the bigger …
18th June 2010
In a speech to the St. Petersburg International Economic Forum this morning, President Medvedev unveiled a series of market-friendly reforms including changes to the capital gains tax regime and a relaxation of restrictions on foreign investment. But …
Our latest ‘Heat Map’ suggests that pressures on the region’s banks have eased in recent months. Capital levels have been rebuilt and loan to deposit ratios are falling. But familiar vulnerabilities remain, particularly in the Baltics, Balkans and …
16th June 2010
Problems in the euro-zone’s periphery will exacerbate the twin-speed recovery already underway in Emerging Europe. No country would escape unscathed from a full-blown crisis in Western Europe, but strong financial linkages mean that Bulgaria and Romania …
The Romanian government looks set to scrape through tomorrow’s no-confidence vote, thus averting a fresh political crisis and keeping relations with the IMF on track for now. But with the vote effectively paving the way for a significant fiscal squeeze, …
14th June 2010
The recent surge in the Swiss franc has rekindled fears over the health of Eastern Europe’s banking sector. As it happens, the bulk of foreign currency lending in the region has taken place in euros. The exception is Hungary, where a stronger Swiss franc …
11th June 2010
The announcement of a renewed fiscal squeeze in Hungary should help to ease market fears of a ‘Greek style’ crisis in the country. But the policies unveiled earlier today sidestep the underlying need to tackle the bloated public sector in favour of …
8th June 2010
The bulk of the region is now experiencing a strong rebound in manufacturing, with Slovakia and Turkey at the head of the pack and Romania lagging behind. The key, however, is whether the recovery in industry will spread to other sectors. For now, with …
We expect currencies across most of Emerging Europe to weaken further against both the euro and US dollar over the next year or so. The Romanian leu looks likely to be the worst performer, while the Turkish lira should do best. … Can Eastern European …
4th June 2010
The recent elections in the Czech Republic appear to have produced a strong centre-right coalition, which will step up efforts at tackling the public deficit. But the looming fiscal squeeze adds to the economic headwinds, and we now expect interest rates …
1st June 2010
Manufacturing PMIs from across the region remain consistent with continued strong growth in industrial production over the coming months. The problem, however, is that there is still little sign of the impressive bounce in manufacturing has begun to …
The proposed appointment of Marek Belka, a well-respected, pro-market economist, as the new Governor of the National Bank of Poland is not yet a done deal. But regardless of who takes over at the helm of the NBP, interest rates will remain unchanged for …
27th May 2010
Hungary’s new government has got off to a disappointing start, with early signs suggesting that economic populism will take priority over much-needed fiscal reform. … Worrying early signs from Hungary’s new …
26th May 2010
Estonia’s low level of public debt sets it apart from the heavily indebted countries on the periphery of the euro-zone. But the country has seen a much bigger erosion of its competitive position over the past few years. An extremely painful period of …
25th May 2010
First quarter GDP data, released by most countries over the past month or so, paint a mixed picture. The highly open economies of Central Europe – notably Slovakia – continue to rebound at a fairly impressive pace. The Hungarian economy also grew at a …
The surge in Russian industrial production growth in April is not quite as good as it appears at first sight since it is flattered by base effects stemming from the collapse in activity last year. In annual terms at least, industrial production growth is …
19th May 2010
Concerns that the new government in Hungary will jeopardise the independence of the National Bank appear to be coming to fruition. While much remains uncertain, it seems clear that PM Orban will now seek to remove Governor Simor, who is well respected in …
18th May 2010
Russia’s public finances are a picture of health compared to those economies in the euro-zone’s periphery. But if oil prices drop further, as we expect, spending may have to be cut in real terms for the next five years in order to meet the government’s …
Q1 GDP data released this morning from across Emerging Europe paint a mixed picture. While the economies in Central Europe all grew on a quarterly basis, those in Southern Europe contracted once again. Given the significant and ongoing headwinds to …
12th May 2010
Today’s announcement that Estonia will join the euro-zone owes much to the huge fiscal tightening enacted last year. But EMU-entry will not be a panacea for the economy, and we expect GDP to contract once again this year. … Estonia given green light to …
Today’s announcement of a seemingly well-designed and sensible fiscal rule in Turkey is an encouraging sign that the government is trying to get to grips with the public finances. But while a rules-based framework can help to instil fiscal discipline, …
11th May 2010
March’s industrial production data from Turkey round off an impressive start of the year for the economy. In light of other positive data releases over recent weeks, we have raised our GDP forecast to 6.5% this year (from 4.0% previously). … Turkey: on …
10th May 2010
Despite the recent jump in Bulgaria’s budget deficit, the fiscal risks are comparatively modest. Nonetheless, the economy still faces a tough time ahead, and we expect it to contract again this year. … Tough year lies ahead for …
7th May 2010
Today’s surprise interest rate cut in the Czech Republic reflects the ongoing lack of underlying inflation pressures in the economy, and lends further support to our view that rates are likely to remain at record lows until well into 2011. … Czech …
6th May 2010
While the National Bank of Romania appears to be reaching the end of its current easing cycle, with the economic recovery still facing significant headwinds, rate hikes remain a distant proposition. … Where now for Romanian interest …
5th May 2010
Concerns over the deepening crisis in Greece have weighed on financial markets across the region over the past couple of weeks. While no country has escaped, the contagion risks appear greatest in Bulgaria and Romania, where financial linkages with Greece …
30th April 2010
Today’s 25bp interest rate cut in Russia will do little to spur lending in the real economy. And while policymakers are likely to cut interest rates further in the near-term, there is a good chance that recent cuts will be reversed in the second half of …
29th April 2010
Financial markets across the region have been hit by the latest developments in Greece, but contagion risks are greatest in Bulgaria, Romania and Hungary. … Assessing the contagion risks from …
28th April 2010
The markets’ favourable reaction to Fidesz’s landslide election victory in Hungary will have been a key factor behind today’s decision by the National Bank (NBH) to cut interest rates by 25bps to 5.25%. Assuming that Fidesz can keep the markets’ …
26th April 2010
Attempts by Czech policymakers to stem the recent rise in the koruna may have some effect at the margin, but we doubt that they will do much to fundamentally alter the value of the currency. In the end, however, with investor risk appetite likely to wane …
22nd April 2010
Today’s gas deal with Russia is undoubtedly a boost for the Ukrainian economy’s near-term prospects, and keeps it on course for an impressive bounce back this year. But with the new government yet to tackle underlying economic problems, medium-term risks …
21st April 2010
The pace of Russia’s recovery is likely to fade and the ruble is likely to weaken if, as we expect, oil prices fall back over the next year or so. … Concerns over a strong ruble unlikely to …
In the absence of a new IMF programme, a fiscal rule could help to reassure markets that Turkey remains committed to maintaining fiscal discipline. But even a well designed fiscal rule requires political backing in order to be effective. And a poorly …
19th April 2010
Both Poland and the Czech Republic are set to announce new Central Bank governors over the coming months. But we suspect this will do little to alter the policy bias in either country. Poland will be amongst the first in the region to tighten monetary …
15th April 2010
Earlier today the Central Bank of Turkey (CBRT) outlined its exit strategy from the additional liquidity measures it introduced during the economic crisis. These include plans to switch to a new benchmark interest rate. The key point, however, is that any …
14th April 2010
A series of policy announcements that are due over the next week or so, including a draft 2010 Budget, should give a clearer idea of the priorities of Ukraine’s new government. Reforms in three areas will be critical to securing the country’s prosperity …
12th April 2010
