Filtered by Subscriptions: Emerging Europe Economics Use setting Emerging Europe Economics
After raising its base rate by a larger-than-expected 125bp, to 13.00%, Hungary’s central bank (MNB) announced today that it has now ended its rate hiking cycle and we now forecast the base rate to be left on hold over the coming year. Even so, with …
27th September 2022
Fiscal support to protect households and businesses from sky-high energy prices generally amounts to around 2-3% of GDP across Central and Eastern Europe (CEE). This will cushion, rather than fully offset, the hit to real economic activity from the …
14th September 2022
In this Update, we analyse the impact of surging energy prices in Europe and show that the Central and Eastern European (CEE) economies are the most vulnerable. The share of household disposable income spent on energy could double to more than 10% and a …
12th September 2022
The National Bank of Poland (NBP) slowed down the pace of its tightening cycle again today with a 25bp rate hike to 6.75%. There was no new guidance in the communications in terms of the central bank’s next move, but with policymakers seemingly more …
7th September 2022
Russia’s squeeze on the gas market helped it to generate $50bn (6% of GDP) in total gas exports in the first half of this year, 2-3 times more than normal. Russia’s balance of payments is in such a strong position that, if oil prices and oil exports …
25th August 2022
The Bank of Israel stepped up its tightening cycle with a 75bp interest rate hike, to 2.00%, today as it became more concerned about the strength of inflation. Our previously-hawkish view for interest rates to reach 3.0% now looks timid and we think a …
22nd August 2022
Turkey’s central bank stepped up its fight against economic orthodoxy by cutting its one-week repo rate by 100bp, to 13.00%, despite the backdrop of inflation at 80% and an extremely poor external position. This latest move could prove to be the trigger …
18th August 2022
A mixed performance, with Poland getting the wrong headlines GDP in Hungary and Romania continued to expand strongly in Q2 by 1-2% q/q, but the Czech and Slovakian economies barely grew at all and there was a shocking 2.3% q/q contraction in Poland. …
17th August 2022
EU funds will provide a key boost to economies in Central and Eastern Europe (CEE) in the coming years as the region navigates a challenging macro environment and slowing global growth. Disputes with the European Commission over the rule of law in Hungary …
10th August 2022
With Russia tightening its squeeze on supply of gas to Europe, governments are turning their attention to other major gas exporters such as Qatar to try to fill the gap. But Qatar’s gas sector is already operating close to capacity and, while the North …
9th August 2022
The Czech National Bank (CNB) became the first major EM central bank to end its tightening cycle after it left its policy rate on hold at 7.00% today. The communications were not as dovish as we had expected, but the new-look MPC is clearly less inclined …
4th August 2022
Western sanctions have caused activity in certain sectors of Russia’s economy to collapse, but activity has held up reasonably well in key areas such as oil production and less import-dependent manufacturing. What’s clear, though, is that the full effect …
3rd August 2022
The decision by Gazprom to cut natural gas supplies to Europe to 20% of capacity has caused gas prices to surge and raised the risk of energy shortages during the winter. A full gas cut-off would result in self-inflicted pain for Russia. For the rest of …
27th July 2022
Romania’s current account deficit is likely to rise to almost 9% of GDP this year. While a weaker currency would help to reduce this shortfall, structural reforms are needed to boost competitiveness in the long term. Until then, Romania’s deteriorating …
21st July 2022
The 200bp increase in the base rate (to 9.75%) by Hungary’s central bank (MNB) today has resulted in the most aggressive amount of monetary tightening in decades. With fiscal policy tightening too and the euro-zone on the verge of recession, all the signs …
12th July 2022
Surging global commodity prices have hit Central and Eastern European economies like a tsunami in recent months, causing a severe terms of trade shock and current account deficits to blow out. These deficits are likely to widen to 7% of GDP in Hungary and …
6th July 2022
The Bank of Israel (BoI) stepped up the pace of tightening today with a 50bp interest rate hike, to 1.25%, as it dropped its commitment to “gradual” interest rate hikes. This suggests that similar moves may be in the pipeline and supports our hawkish view …
4th July 2022
Ukrainian refugees have boosted labour forces and consumer spending across Central and Eastern Europe (CEE) since the outbreak of the war, but this could prove short-lived if the conflict remains concentrated in Eastern Ukraine and more refugees return …
30th June 2022
The G7 proposal to impose a cap on the price of Russian oil and gas would introduce new supply-side risks by potentially disrupting Russian energy supplies. This could push global energy prices up further, but for now we still see Brent crude prices …
28th June 2022
Hungary’s central bank (MNB) stepped up the pace of tightening today with a much larger-than-expected 185bp increase in its base rate, to 7.75%, and the hawkish communications underline the view that further large rate hikes are likely to be delivered …
Russia’s government has now reportedly defaulted on its foreign-currency denominated debt for the first time since 1918, but this is a largely symbolic event that is unlikely to have an additional macroeconomic impact. Sanctions have already done the …
27th June 2022
High inflation, falls in the lira and aggressive monetary tightening elsewhere are clearly not enough to persuade Turkey’s central bank to lift interest rates, as it left its policy rate at 14.00% today. Disorderly falls in the lira are a major risk, …
23rd June 2022
Central and Eastern European economies are experiencing their worst bout of inflation since the late-1990s as surging food and energy prices have added to strong core price pressures across a broad range of goods and services. Monetary tightening cycles …
20th June 2022
The recent falls in the Turkish lira have led to increased speculation that, with the CBRT showing no sign of willingness to raise interest rates, policymakers will be forced to turn to capital controls to prevent sharp and disorderly moves in the …
16th June 2022
Israel’s labour market has tightened significantly in recent months and while there is so far little sign of a burst of wage pressure coming through, this is likely to be in the pipeline and feed through into stronger core inflation next year. Alongside a …
14th June 2022
The Russian central bank (CBR) delivered a 150bp interest rate cut to 9.50% today as its focus continued to shift away from inflation risks towards supporting the economy. We think further reductions are likely to be more gradual, with rates ending this …
10th June 2022
The Turkish lira has continued to slide and the current backdrop is eerily similar to that which preceded previous currency crises. Sharp and disorderly falls in the lira over the coming weeks are now a real risk. The lira slipped beyond 17/$ this morning …
8th June 2022
Despite the backdrop of inflation at 70% and the lira falling by falling by 10% against the dollar this month, Turkey’s central bank left interest rates on hold at 14.00% today. So long as President Erdogan is in power, rate hikes will remain off the …
26th May 2022
Exports from Central and Eastern Europe (CEE) face growing headwinds, and this feeds into our below consensus view on economic growth in the region. The larger economies in CEE such as Poland and Hungary are particularly exposed to slower growth in the …
25th May 2022
In this Update , we answer a number of key questions on Russia’s public finances, including the likelihood of a sovereign default, the impact of higher energy prices and the collapse of the economy on the budget position, and how the government would be …
23rd May 2022
The Bank of Israel (BOI) hiked its policy by a larger-than-expected 40bp today, to 0.75%, and the backdrop of a strong economy, tight labour market and mounting inflation pressures means that we think it will deliver further hikes at its upcoming …
The Turkish lira has come under renewed pressure in recent weeks but interest rate hikes to shore up the currency are off the cards. Instead, further sharp and disorderly falls would most likely be met by formal capital controls and more strident …
19th May 2022
News of force majeure on one of the pipelines in Ukraine bringing Russian natural gas to Europe just adds to our conviction that Europe is going to struggle to meet its gas needs over the next year. The heightened competition for gas imports suggests that …
11th May 2022
Russia has suspended the publication of monthly trade data, but figures from its trading partners show that import values plunged 45% m/m in March while exports rose slightly amid high commodity prices. This is likely to remain the case, pushing Russia’s …
Industrial production in Central Europe performed much better than expected in March given the sharp fall in German production. We still think industry will weaken in Q2 as supply chain disruptions bite, but we’re hopeful that the major economies in …
10th May 2022
Central banks in Czechia and Poland caught investors by surprise today as the Czech central bank (CNB) unexpectedly re-accelerated the pace of its tightening cycle with a 75bp hike while Poland’s central bank (NBP) slowed the pace of tightening with a …
5th May 2022
Poland’s government has shown no signs of meeting President Putin’s demand to get gas flows restored, but we think the economy is relatively well placed to deal with a loss of Russian supplies. As things stand, we do not expect any energy rationing and we …
We think that the surprising stability of the Turkish lira so far this year will not last much longer and we forecast it to weaken against the dollar over the coming months, from ~14.8/$ now to 18/$ by end-2022. This would be a fall of around 20% and, …
The EU proposal to end imports of Russian crude oil and petroleum products by the end of the year has long been in the works. If approved, we expect Russia’s oil exports to fall by around 20% this year, which in turn would keep oil prices over $100 per …
4th May 2022
Russia’s central bank (CBR) cut its policy rate by another 300bp to 14.0% today and the communications suggest that the CBR is now more focused on boosting credit growth than it has been in the past. This shift in the CBR’s policy framework is likely to …
29th April 2022
Russia’s decision to suspend gas deliveries to Poland and Bulgaria from today because of a payments dispute will only strengthen the EU’s resolve to end its dependency on Russian gas, keeping gas prices historically high for months to come. The move also …
27th April 2022
Spillovers from the war in Ukraine are likely to cause Turkey’s current account deficit to widen to more than 4% of GDP this year. In the recent past, deficits of this scale have tended to precede sharp falls in Turkey’s currency. Turkey’s current account …
25th April 2022
The Bank of Israel kick-started its tightening cycle today with a 25bp interest rate hike to 0.35% and we think it will deliver further hikes at its upcoming meetings, taking rates to around 2.00% in the first half of next year. This is currently more …
11th April 2022
Timely indicators suggest that Russian manufacturing contracted by around 20% y/y in March and that consumer spending fell by 10% y/y at the start of April. Russia’s economic downturn looks set to deepen in the coming months as the effects of sanctions, …
7th April 2022
The National Bank of Poland (NBP) unexpectedly delivered its largest interest rate hike in 22 years today (100bp, to 4.50%) to get on top of the deteriorating inflation outlook and we think there’s little argument against further hikes to come. We now …
6th April 2022
The Czech National Bank (CNB) slowed the pace of its tightening cycle for the third consecutive month today with a 50bp rate hike to 5.00%, but hawkish communications after the meeting suggest that the CNB is not finished yet. We now expect a 50bp hike at …
31st March 2022
Fidesz is looking the most likely to retain power in Hungary’s election this weekend, which will pave the way for four more years of tensions with the EU over the rule of law and raise the likelihood that EU fund inflows are withheld. From a macro …
There are already clear signs of spillovers in Central and Eastern Europe (CEE) from the war in Ukraine and we think that the overall hit to GDP growth in the region this year will amount to 1.0-1.5%-pts. Our forecasts for growth are generally below those …
29th March 2022
The potential for around 3 million refugees to settle in Central and Eastern Europe (CEE) by the middle of this year will present a large fiscal cost, but will also boost the size of the labour force and GDP in the near term. We estimate that the increase …
23rd March 2022
Hungary’s central bank (MNB) stepped up the pace of tightening today with a 100bp increase in its base rate, to 4.40%, and the hawkish communications underline the view that the central bank will respond to the deterioration in the inflation outlook with …
22nd March 2022