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The markets have welcomed Fidesz’s landslide victory in yesterday’s election in Hungary. But with a distinct lack of policy detail from the party so far, we remain only cautiously optimistic that its huge majority will translate into decisive action to …
12th April 2010
On the whole, firms, rather than households, have borne the brunt of the credit squeeze in Emerging Europe. In fact, lending to consumers has already started to pick up in those countries with relatively healthy banking sectors. But the bigger point …
9th April 2010
Despite being richer than the rest of the so-called BRICs, there is still plenty of scope for Russia to undergo a period of rapid catch-up growth and it may yet overtake Germany as Europe’s largest economy by 2035. But this would require wholesale policy …
6th April 2010
Forthcoming elections in Hungary and the Czech Republic are likely to spotlight fiscal frailties in both countries. As ever, the risks remain greatest in Hungary. But the likelihood of a weak government means that efforts to tackle the Czech Republic’s …
31st March 2010
Q4 2009 GDP data from Turkey support our view that it will be one of the best performing economies in the region over the next few years. Nonetheless, while growth should impress in the near-term, Q4’s headline growth figure probably overstates the true …
The fact that policymakers in both Hungary and Romania are still cutting interest rates when their counterparts elsewhere in the world have begun to withdraw stimulus measures reflects the depth of the recession in both countries and the fact that adverse …
29th March 2010
Financial markets in Emerging Europe have, for the most part, brushed off sovereign debt concerns in the euro-zone’s periphery. While bond markets sold off earlier this year as the crisis in Greece reached its peak, yields on both foreign and local …
Today’s decision by the Central Bank of Russia (CBR) to cut its key interest rates by 25bps came as no surprise. But cuts in official interest rates will do little to spur lending in the real economy. The more important point is that, as things stand, the …
26th March 2010
The Czech National Bank kept interest rates unchanged at 1.00% this afternoon. But while the markets expect a first rate hike in the third quarter of this year, we do not expect interest rates to be raised until the middle of next year. … Czech rates to …
25th March 2010
The deterioration in the growth outlook for the euro-zone adds to the substantial headwinds already facing the recovery in Emerging Europe. We have nudged down our 2011 GDP forecasts for Slovakia and the Czech Republic, in response to a downgrade in our …
Despite the recent improvement in Hungarian retail sales and wage data, domestic demand will continue to weigh on growth in the near-term. All told, we expect the economy to contract once again this year, and for its recovery to lag well behind the rest …
23rd March 2010
Market rate expectations have edged down in recent weeks, but we still think that the pace of tightening currently priced in for most countries in the region is too aggressive. While inflation has picked up in some economies (notably Turkey) in recent …
19th March 2010
The collapse of Latvia’s ruling coalition earlier today underlines the difficulty of carrying out the aggressive fiscal cuts that are needed to keep the country’s IMF programme on track. … Latvia’s government left in …
17th March 2010
This report is only available as a PDF. Click to download. … Is the recovery for real? (Q1 2010) …
We have nudged up our forecast for Russian growth and the ruble for this year, partly in response to an upward revision to our profile for oil prices. But the bigger picture is that we still expect the recovery to disappoint. … Oil prices still set to …
10th March 2010
Data released today suggest that the Czech economy may be on course to return to growth in Q1 2010. Nonetheless, there remains little sign of a strong and sustainable recovery emerging, and we are sticking to our below consensus forecast for GDP to grow …
9th March 2010
In a recent Update we argued that the crisis in Greece has dealt a huge blow to the prospects for a further rapid expansion of the euro-zone (see Emerging Europe Update, ‘Greek tragedy to temper EMU expansion’, 22nd February). However, a more immediate …
4th March 2010
The collapse of Ukraine’s government earlier today may paradoxically be a positive development, but a lot of progress still needs to be made before access to IMF funding is unfrozen. Accordingly, while it is possible that the government can scrape through …
3rd March 2010
Q4 Polish GDP data released this morning confirmed an earlier preliminary estimate that the economy grew by 1.7% in 2009 and by 3.1% y/y in the final quarter of last year. But while Poland should continue to outperform its peers in the region, the current …
2nd March 2010
Q4 GDP data, released over the past month, have painted rather a mixed picture. The good news is that a number of countries, notably Russia and Poland, appear to have grown on a quarterly basis. But in Russia’s case, we suspect that this owed more to a …
25th February 2010
A combination of a massive fiscal stimulus and a boost from the inventory cycle should ensure that the Russian economy grows at annual rates in excess of 6% during the first half of this year. But the prospect of a renewed fall in oil prices later this …
24th February 2010
Spreads on Russian and Turkish foreign currency bonds relative to US Treasuries have moved in lockstep since October 2009. (See Chart 1.) The prospect that commodity prices (and especially oil prices) drop back again later in the year suggests that …
23rd February 2010
Some commentators think that this afternoon’s decision by the National Bank of Hungary (NBH) to cut interest rates by 25bps to 5.75% will mark the end of the current easing cycle. However, while the pace of cuts has slowed over recent months, we think …
22nd February 2010
Recent events in Greece have fundamentally weakened the economic arguments in favour of a rapid expansion of the euro-zone to include EU member states in the East. Political appetite for euro-area enlargement may also start to wane. So while Estonia may …
This morning’s 25bps cut in Russian interest rates may help to stem some of the upward pressure on the ruble but it is unlikely to do much to spur lending. What’s more, if oil prices fall back this year, as we expect, near-term concerns about currency …
19th February 2010
Although inflation has risen across much of the region in recent months, policymakers remain in no rush to raise interest rates. For a start, the bulk of the pick-up in inflation has been caused by tax hikes (primarily on alcohol and tobacco) and base …
18th February 2010
After shrinking markedly from the levels seen in mid-2008, Turkey’s current account deficit has begun to widen once again. While the deficit has not yet reached danger levels, the bigger picture is that in the absence of reforms to boost domestic saving, …
17th February 2010
As expected, the replacement of Poland’s entire Monetary Policy Council (MPC) which was completed today is unlikely to mark a fundamental shift in the Council’s bias. As a result, we are sticking to our view that interest rates will remain on hold until …
16th February 2010
The flurry of Q4 GDP data released this morning paint a pretty grim picture. Most countries, with the notable exception of Slovakia, appear to have contracted on a quarterly basis and there is little here to change our view that the recovery in Emerging …
12th February 2010
While there are tentative signs that credit conditions are starting to ease in parts of the region, the improvement has so far been confined to those countries with relatively healthy banking sectors – most notably Poland and Turkey. Elsewhere, however, …
10th February 2010
Exit polls suggest that Viktor Yanukovich has defeated Prime Minister Yulia Tymoshenko in the race to become Ukraine’s next President. But his margin of victory in yesterday’s run-off was slim and the result is now likely to be contested in the courts. …
8th February 2010
Russian inflation fell to its slowest rate in nearly three years in January. With the recovery set to lose steam over the coming quarters, we expect inflation to fall to record lows later this year. … Russian inflation heading for record …
4th February 2010
This morning’s decision by the National Bank of Romania (NBR) to cut interest rates by 50bps to 7% is testament to the more stable political outlook that has emerged since the end of last year. With the IMF/EU programme back on track, and the leu …
3rd February 2010
The sharp rise in Turkish inflation last month was due largely to one-off factors and does nothing to change our view that the aggressive interest rate hikes now priced into the market are unlikely to materialise. Core inflation pressures remain subdued …
Preliminary GDP data released today suggest that the Russian economy had a strong finish to 2009 and mean that GDP growth could top 6% y/y in the first half of this year. However, with the price of oil expected to fall in H2 2010, we suspect that the pace …
1st February 2010
Inflation across much of Emerging Europe has risen in recent months. Nonetheless, there are good reasons to think that these rises will be short-lived. For a start, the pick-ups have been driven largely by energy inflation, stemming in part from the base …
29th January 2010
A preliminary estimate of 2009 GDP released this morning suggests that despite the turmoil in the global economy, Poland managed to grow by 1.7% last year. But while the Polish economy should continue to outperform its peers in the region, the next couple …
28th January 2010
The outlook for Turkish stocks is brighter than for other equity markets in Emerging Europe. Absolute gains this year will be limited by waning risk appetite, but relative outperformance seems likely. … How will Turkey’s stock market fare in …
The sell-off in Russian markets over the past week or so has served as a timely reminder that they are the most vulnerable in the region to shifts in global risk appetite. We expect both the ruble and Russian equities to fall further over the course of …
27th January 2010
This afternoon’s decision by the National Bank of Hungary (NBH) to cut interest rates by 25bps to 6% suggests that policymakers will now cut rates at a slower pace than we previously thought. Nonetheless, we are sticking to our long-held view that rates …
25th January 2010
The very worst fears of a major fiscal blow-out in the run-up to Hungary’s parliamentary elections are probably overblown. But given Hungary’s comparatively high level of debt and history of fiscal profligacy, there is little room for complacency. And …
While policymakers in a number of countries have appeared less dovish of late, three factors should keep interest rates much lower than the markets currently expect. First, the pace of economic recovery is likely to disappoint. Second, despite an …
21st January 2010
As Eastern Europe limps out of recession, enthusiasm for euro accession appears to be building. In a speech yesterday, Hungarian PM Gordon Bajnai said that his country should adopt the euro ‘as soon as possible’ and, much to our surprise, Estonia looks …
20th January 2010
The worst of the downturn in Croatia may have passed but the economy is still facing an uphill struggle. We expect GDP to grow by just 0.5% this year and by 2.0% in 2011, compared to average annual growth rates of 5% between 2002 and 2008. … Croatia’s …
19th January 2010
Romania’s parliament last night agreed a series of cuts to this year’s budget that should get its IMF-led loan programme back on track. Nonetheless, the economic recovery is still likely to disappoint. … Romania: IMF loan back on track, but growth to …
15th January 2010
While the worst of the recession in Emerging Europe has passed, a fundamental lack of competitiveness will hold back the recovery in much of the region. Poland and Turkey stand out as two notable brightspots, and appear better placed to capitalise on the …
14th January 2010
This time last year, banking sectors across Emerging Europe were on the brink of collapse. Financial conditions have since stabilised, but how are the region’s banks likely to fair in 2010? In order to better assess this we have constructed a ‘Heat Map’. …
13th January 2010
Today’s inflation data from the Czech Republic should put to bed any lingering fears of a prolonged period of deflation. But with core price pressures set to remain subdued, we still think that interest rates are unlikely to rise until the final quarter …
11th January 2010
Recent quotes from leading policymakers suggesting that Turkey is in advanced talks with the IMF should be taken with a pinch of salt, particularly as negotiations have already dragged on for over a year. But while Turkey could probably struggle by …
7th January 2010
This morning’s decision by the National Bank of Romania (NBR) to cut interest rates by 50bps to 7.5% is likely to be the first of a number of cuts over the coming months. While any further political turmoil could yet hold up the easing cycle once again, …
5th January 2010
