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While the Credit Suisse rescue might draw a line under that particular institution’s problems, it is clear that confidence in the financial sector overall is still extremely fragile. So regardless of whether more financial institutions run into trouble, …
20th March 2023
Worries about the health of the global banking system dominated headlines this week after the collapse of Silicon Valley Bank (SVB) and concerns about the viability of Credit Suisse. Our coverage of ongoing developments can be found here . In terms of the …
17th March 2023
CBR keeps Q2 rate hike on the table The statement accompanying the Russian central bank’s (CBR’s) decision to keep its policy rate unchanged at 7.50% stuck to the hawkish script from February. While it didn’t confirm that an interest rate hike is on the …
A key channel through which emerging markets could be affected by the strains in the global banking sector is if lending by foreign banks falls sharply. On this front, EMs’ vulnerabilities have eased since the Global Financial Crisis. But there are still …
16th March 2023
At the time of writing, financial markets appear to be stabilising after the turmoil caused by the collapse of SVB. And it doesn’t look like EMs have suffered large capital outflows or strains in their banking sectors. If this relatively benign scenario …
14th March 2023
Economy continues to boom in early 2023 The large increases in industrial production and retail sales in Turkey in January suggest that the economy got off to a strong start in early 2023. Activity will have been disrupted from the earthquakes last month, …
13th March 2023
Broad-based falls in inflation last month Russian inflation came in slightly softer than expected in February, at 11.0% y/y, and it will fall to the central bank’s 4% target in March as base effects pass through. We don’t think there’s been enough …
10th March 2023
The view that interest rates in developed markets may rise further and stay higher for longer than previously anticipated gained further traction this week following US Fed Chair Jerome Powell’s hawkish comments on Tuesday. Our US Economics team revised …
The National Bank of Poland (NBP) left its main policy rate on hold as expected today, at 6.75%, and we don’t think policymakers will rule out further rate hikes just yet (today’s statement gave little away in terms of guidance). But with inflation likely …
8th March 2023
Rates on hold, door for rate cuts this year remains open Poland’s central bank (NBP) left its main policy rate on hold as expected again today, at 6.75%, and we don’t think the NBP will rule out further interest rate hikes just yet. But with inflation …
The very high household saving rate in Czechia and the sharp fall in inflation we expect there this year means there is scope for consumer spending to recover over the coming quarters. But we think consumers will still exercise caution and that a …
Koruna strength will add to disinflation in Czechia The recent strength of the Czech koruna, which hit a 14-year high of 23.3/€ this week, adds to a number of disinflationary forces that are currently taking hold in the country. And we think that …
3rd March 2023
Inflation declines, but disinflation process slows Inflation in Turkey fell to 55.2% y/y in February, but underlying price pressures remain strong and the disinflation process appears to be happening more slowly than had been expected. Inflation will stay …
The Israeli shekel has been amongst the worst performing currencies over the past month amid a rise in risk premia in Israel. We think it may remain under pressure against the US dollar over the coming months; but we doubt it will keep underperforming its …
1st March 2023
Industrial downturns in CEE bottoming out The manufacturing PM Is for February suggest that industrial sectors in Central and Eastern Europe are continuing to struggle, but there are tentative signs that the region may now be past the worst of its …
Hungary’s central bank (MNB) reiterated the message that it’s unlikely to cut its base rate anytime soon, when it left that rate on hold again today (at 13.00%). That said, the MNB offered some signs that it may be close to phasing out its market …
28th February 2023
MNB to keep its base rate on hold as inflation threat persists Hungary’s central bank (MNB) left its benchmark base rate on hold again today (at 13.00%) and, with inflation likely to stay far above target for some time, we don’t expect the MNB to start …
Strong Q4, but slowdown in store for 2023 Turkey’s economy expanded by 0.9% q/q (3.5% y/y) in Q4, but growth remained unbalanced as it was driven largely by private consumption while net trade provided a sizable drag. We think growth will slow towards …
The EC’s Economic Sentiment Indicators (ESIs) continued to rebound across Central and Eastern Europe in February, with our regional weighted measure hitting an eight-month high. It is broadly consistent with the region having passed the worst of its …
27th February 2023
Russia’s economy defied expectations in 2022 Russia’s war in Ukraine, which marks its one year anniversary this week, fundamentally changed the geopolitical and economic landscape in the region. From a macroeconomic perspective, one of the more surprising …
24th February 2023
Last week’s European Court of Justice (ECJ) opinion on Poland’s Swiss franc mortgage dispute dealt yet another blow to Poland’s banking sector and will expose those banks with large FX loan portfolios. The sector as a whole looks strong, but many banks …
23rd February 2023
CBRT eases policy after earthquakes hit Turkey’s central bank (CBRT) lowered its key policy rate by 50bp, to 8.50%, today as policymakers sought to support the economy in the wake of the devastating earthquakes this month. Another rate cut in March looks …
The first year of the war in Ukraine has had an enormous impact on the country’s economy and left it highly dependent on financing from allies. Russia’s economy has contracted too, but it weathered the impact of Western sanctions better than expected and …
22nd February 2023
The sharp fall in European electricity prices sets the stage for a recovery in metals output across the region. As power prices are still historically high and unlikely to fall that much further, however, the potential for a full and rapid recovery is …
Russia’s budget deficit has widened sharply in recent months and is likely to remain under pressure amid lower oil prices and rising military spending. The government is unlikely to experience severe fiscal strains this year, but the public finances are …
21st February 2023
A weak start to 2023 Poland’s softer-than-expected activity data for January suggest that the economy started 2023 on weak footing and we expect it to struggle for momentum over the first half of the year as high inflation and tight monetary conditions …
Shallower contraction in GDP as sanctions hit fades The 2.1% contraction in Russian GDP in 2022 was smaller than expected and is consistent with an expansion in Q4, providing further evidence to suggest that the economy stabilised after the initial hit …
20th February 2023
The Bank of Israel (BoI) hiked interest rates by another 50bp, to 4.25%, today and while it continued to point to signs of slower growth, it sounded more concerned about the strength of inflation than it did at its last meeting. It now looks likely that …
Tough times ahead for CEE, after Q4 contraction … Q4 GDP data released across Central and Eastern Europe (CEE) this week were a mixed bag, but show that the regional slowdown at the end of 2022 was (broadly) as we had anticipated. We now know that the …
17th February 2023
Economy struggles despite strong GDP print The surprise acceleration in Israel GDP growth in Q4, to 5.8% q/q annualised, is not as good as it seems at first sight. The strength was largely driven by an unexpected surge in expenditure on personal …
16th February 2023
Signs of softening labour markets across Central and Eastern Europe (CEE) support our view that intense wage pressures in the region will ease in the coming months. Even so, we still think that wage growth will generally remain above levels consistent …
15th February 2023
Recessions hit in Hungary and Czechia, further weakness ahead The falls in GDP in Central and Eastern Europe shown in the Q4 figures probably mark the worst of the regional downturn, but we still think that activity will (at best) only stagnate over …
14th February 2023
Further thoughts on Turkey’s earthquake disaster The earthquake that hit Turkey and Syria this week, killing more than 21,000 people, is a human tragedy and our thoughts are with everyone affected. It’s still too early to fully assess the macroeconomic …
10th February 2023
CBR changes the script as inflation risks mount Russia’s central bank (CBR) left rates on hold at 7.50% today but its communications were far more hawkish than expected as it talked about a further build-up of inflation risks and the possibility of hiking …
Economy likely to have rebounded strongly in Q4 The rebound in industrial production in Turkey in December and the strength of retail sales in recent months point to an expansion of GDP in the order of 0.5-1.0% q/q in Q4. Activity will be disrupted this …
Tightening cycle over, but cuts unlikely until 2024 The National Bank of Romania (NBR) left its policy rate on hold today, at 7.00%, and we think that its tightening cycle is now over. Even so, interest rate cuts probably won’t arrive until 2024. Today’s …
9th February 2023
Q4 stronger than expected The latest industrial production and retail sales data for Russia for December were relatively weak, but Q4 was a bit stronger than we had expected and the economy is likely to have expanded slightly in the final quarter. Over …
8th February 2023
Rates unchanged, rate cuts possible by year-end Poland’s central bank (NBP) kept its main policy rate on hold at 6.75% as expected today and, with the economy slowing and inflation near a peak, further hikes are unlikely. We expect the central bank to …
The recent earthquakes that hit Turkey and Syria are a human tragedy and foremost in everyone’s minds. Nonetheless, the financial markets will also need to bear in mind the economic cost and, to the extent that this provides some comfort, the damage to …
7th February 2023
The energy crisis in Central and Eastern Europe (CEE) has lost some of its bite as natural gas prices have slumped and countries have made good progress in replacing Russian energy supplies. This has brightened the near-term outlook and reduced the risk …
6th February 2023
Pavel’s election victory & the Czech-China spat The victory for former NATO general Petr Pavel in the second round of the Czech presidential election last weekend ought to have limited immediate implications for the Czech economy, as the President has …
3rd February 2023
The hawkish tone struck by the Czech National Bank (CNB) as it left its policy rate on hold again today, at 7.00%, isn’t prompting us to abandon our view that rates will be cut around the middle of this year. That said, we have now pushed the timing of …
2nd February 2023
Dovish pivot coming soon The Czech National Bank (CNB) delivered no surprises in leaving its policy rate on hold again today, at 7.00%, but we maintain our view that it will cut interest rates a bit more quickly than most others expect. Our current …
Concerns over democratic backsliding and an escalation of the Israeli-Palestinian conflict associated with Israel’s new far-right government won’t necessarily mean that foreign investment into Israel dries up or that the economy suffers in the short run. …
1st February 2023
Signs of improvement The manufacturing PMIs for January rose in most countries and add to evidence from other surveys that, while economies in Central and Eastern Europe may struggle in the early part of this year, the outlook for economic activity is …
Recession underway The 0.3% q/q contraction in Czech GDP in Q4 confirmed that the economy was in recession over the second half of last year. The outlook for the economy has brightened a bit in recent months as natural gas prices have fallen sharply and …
31st January 2023
Sharp slowdown in Q4, but sentiment improves further in January Economic sentiment in Central and Eastern Europe picked up again in most countries in January and our regional-weighted measure hit a four-month high. We still think that GDP in most …
30th January 2023
A Q4 fall in GDP The 4.9% increase in Polish GDP over 2022 as a whole is consistent with a slowdown in growth to around 1.6% y/y in Q4 and a small quarterly decline in output of around 0.5% q/q, confirming that the economy slumped towards the end of the …
Turkish policymakers deepen de-dollarisation Turkish policymakers deepened their “lira-isation” drive this week by increasing the incentive for firms to convert their FX into lira, but we’re not convinced that the policy changes will be successful and …
27th January 2023
The growth outlook for 2023 across Central and Eastern Europe has brightened a bit over the past month. Wholesale European natural gas prices have continued to fall sharply and survey measures of activity have generally improved. The outlook for external …
26th January 2023
