Filtered by Subscriptions: Emerging Europe Economics Use setting Emerging Europe Economics
The coronavirus crisis is likely to cause unemployment rates to jump by 5%-points or so across most of the region in Q2 and we think the labour market fallout could be much worse in Turkey. However, most of the rise in unemployment should prove temporary …
28th April 2020
The Russian central bank abandoned its cautious approach to the coronavirus outbreak by cutting its key policy rate by 50bp, to 5.50%, today and the accompanying communications gave the clearest possible indication that further easing is on the cards. …
24th April 2020
The plunge in oil prices won’t push Russia’s economy into a financial crisis, as it did in 2008/09 and 2015. But the government is likely to run its largest budget deficit since the late 1990s, which will limit the size of the fiscal package to support …
22nd April 2020
The Turkish central bank responded to signs of a clear downturn in the economy by cutting interest rates by a further 100bp today but, with downward pressure on the lira continuing to mount, we think that the scope for further monetary easing is limited. …
The damage to Turkey’s economy from the coronavirus outbreak has led to suggestions that the government may turn to the IMF for a financing package, but the political backdrop means that this would almost certainly be a last resort. Policymakers would …
15th April 2020
Economies across Emerging Europe are heading for a sharp contraction in output, but one crumb of comfort is that vulnerabilities are drastically lower than they were in the run-up to the Global Financial Crisis. Large balance sheets strains are unlikely …
9th April 2020
Turkey’s banks muddled through the currency crisis two years ago, but they are now in a weaker position to confront the economic and financial market fallout from the coronavirus outbreak. At the very least, the recent sharp tightening of external …
2nd April 2020
The Czech central bank followed up last week’s emergency interest rate cut with further easing today and opened the door to use other measures to support the economy and stabilise the financial system. With the economic damage from the coronavirus …
26th March 2020
Hungary’s central bank announced a range of measures to increase liquidity in the banking system at today’s MPC meeting. But the economic effects of the coronavirus are likely to be much more damaging than policymakers currently think, suggesting that …
24th March 2020
The slump in domestic and external demand as a result of the coronavirus outbreak means that we now expect the Russian economy to contract sharply this year. Despite its recent reluctance we expect the central bank to cut interest rates before long and …
Countries across Emerging Europe have stepped up their efforts to contain the coronavirus outbreak over the past week or so and the economic damage will now be much more severe than we had previously thought. Output will decline sharply in Q2 and, even if …
23rd March 2020
The Russian central bank’s decision to keep the policy rate unchanged at 6.00% today made it one of the few major central banks that has yet to cut rates to support the economy in response to the coronavirus. The central bank announced a series of …
20th March 2020
The Turkish lira has held up relatively well amid the coronavirus-related sell-off in EM currencies, but the country’s large external debts leave it vulnerable if external financing conditions continue to tighten. A sharper sell-off in the currency would …
19th March 2020
The coronavirus outbreak has prompted interest rate cuts and fiscal support packages in several countries across Emerging Europe and we think that more easing lies in store. That said, Turkey’s easing cycle could grind to a halt and the sharp fall in the …
18th March 2020
The restrictive measures implemented by the authorities across Central and Eastern Europe to stem the spread of the coronavirus, as well as the spillover effects from the downturn elsewhere, will result in a sharp fall in regional GDP in Q2, of perhaps as …
The collapse in oil prices will reduce current high rates of inflation in Central Europe and provide some respite for those oil importers with more fragile external positions (Turkey, Romania and Ukraine). However, it will do little to cushion the blow to …
12th March 2020
The recent fall in the ruble will help to cushion the hit to the Russian government’s revenues resulting from the plunge in oil prices, but it will come at a cost to corporates that have large external debt burdens. The ruble slumped by 8% against the …
10th March 2020
The tailspin in global oil prices will push Russia’s current account and budget balances into deficit but shouldn’t create severe strains in the economy. It would probably take a steeper fall in prices, to $25pb or lower, to put a brake on plans to raise …
9th March 2020
With the coronavirus outbreak spreading across Europe and its disruption to economic activity likely to mount, we think that the Polish central bank will ease policy this year. But the tone of the MPC’s post-meeting press conference today suggests that …
4th March 2020
The spread of coronavirus outside China and its possible economic effects has prompted us to revise down our GDP growth forecasts across the region by 0.2-0.5%-pts. The scope for monetary easing is limited, but we think that central banks in Poland and …
In light of the accelerating spread of the coronavirus – and the economic disruption that is likely to follow – we are pulling down our GDP growth forecasts for Q1 and Q2 of this year. Growth is likely to rebound over the second half of the year, but most …
2nd March 2020
The slightly more hawkish tone of the Hungarian central bank’s post-meeting statement supports our view that the central bank will deliver a 10bp hike in the overnight deposit rate next month. However, the MNB is a dovish institution and, with inflation …
25th February 2020
Hungary’s central bank will probably use Tuesday’s meeting to flag a shift towards tightening and we expect a small hike in the overnight deposit rate in March. But this is likely to be a symbolic gesture more than anything else. Monetary policy will stay …
24th February 2020
The Turkish central bank (CBRT) shrugged off rising inflation and lowered interest rates by another 50bp today, but the accompanying statement was a little more cautious and we think that the easing cycle is nearing an end. With inflation set to surprise …
19th February 2020
The Turkish authorities have kept a tight grip on the lira in recent weeks but we don’t think that this can continue for much longer and expect the currency to fall by 20% against the dollar by end-2020. The longer that policymakers intervene to prop up …
10th February 2020
The Russian central bank governor’s post-meeting press conference reinforced the message that, following today’s 25bp interest rate cut to 6.00%, further easing lies in store. We maintain our view that there will be another 50bp of rate cuts in the …
7th February 2020
The statement and press conference following today’s Czech MPC meeting confirmed that the surprise decision to hike interest rates by 25bp, to 2.25%, will be a one-off. Policymakers will probably maintain a hawkish tone over the next few months but, as …
6th February 2020
The investment booms that provided a key support to Central and Eastern Europe probably peaked last year. This is one reason why we think that regional GDP growth will slow in 2020-21. Investment booms tend to follow similar cycles across Central and …
5th February 2020
The Turkish central bank (CBRT) cut interest rates by another 75bp today as policymakers bowed to pressure from President Erdogan for looser policy. More rate cuts are likely in the next few months. But the strong economic recovery will cause inflation to …
16th January 2020
Hungary’s economy is likely to lose some steam this year, but loose policy will ensure that growth remains above potential. This will keep inflation high and economic imbalances will continue to build . The outperformance of Hungary’s economy last year …
15th January 2020
The recent rise in inflation to multi-year highs across most of Central Europe has only a little further to run, but it will stay above central banks’ targets across the region this year. Policymakers will probably look through this and keep interest …
9th January 2020
The Russian central bank governor’s post-meeting press conference was characteristically cautious, supporting our view that following today’s 25bp interest rate cut, there will probably be just one more 25bp reduction (to 6.00%) in the current easing …
13th December 2019
The 200bp interest rate cut (to 12.0%) by the Turkish central bank as well as other recent tweaks to boost lending suggest that policymakers will try to meet President Erdogan’s demand to bring rates down to single digits and bolster growth. As a result, …
12th December 2019
The recent strength of motor vehicle production across Central Europe will be increasingly difficult to sustain as weakness in the German economy persists. The Czech Republic’s vehicle sector is likely to struggle the most as a result, while Hungary’s …
There is a growing expectation that Russia’s government will adjust the way the National Welfare Fund invests next year. In this Update , we take a closer look at what this means and explain why, contrary to hopes in some quarters, it is unlikely to …
11th December 2019
Q3 GDP figures due next week are likely to show that Turkey’s economic recovery has continued and we think that year-on-year growth could reach as high as 5-6% in Q4 and early 2020. But policy loosening and rapid credit growth risk fuelling a fresh …
29th November 2019
The recent pick-up in bank lending in Turkey probably has further to run over the coming months, which will provide some support to the economic recovery. But the pace and composition of new lending indicates that vulnerabilities in the banking sector and …
12th November 2019
GDP figures this week are likely to show that Central and Eastern Europe recorded another strong quarter of growth in Q3, despite ongoing weakness in the euro-zone. But more timely data suggest that this strength won’t last, supporting our view that …
11th November 2019
The statement following today’s MPC meeting confirmed that the Czech central bank is still concerned about above-target inflation and the need to hike interest rates. But with the economy likely to slow sharply next year and inflationary pressures to …
7th November 2019
The National Bank of Poland (NBP) left interest rates on hold at 1.50% today and with external headwinds mounting and the economy likely to slow sharply over the coming quarters, calls for interest rate cuts are likely to grow. But we think that …
6th November 2019
Turkey’s economy has made a strong recovery from its recession last year, but investment has continued to fall and is unlikely to make a quick turnaround over the next couple of years. GDP rose by 1.6% q/q in Q1 and 1.2% q/q in Q2 (see Chart 1), supported …
31st October 2019
The Russian central bank’s decision to opt for a 50bp rate cut today (to 6.50%) and the dovish tone of the accompanying statement support our view that the easing cycle has further to run. As things stand, we expect the one-week repo rate to be lowered to …
25th October 2019
September’s plunge in inflation alongside the removal of US sanctions gave the Turkish central bank the green light to deliver another larger-than-expected interest rate cut today and the easing cycle has a little further to run in the coming months. But …
24th October 2019
The weakness in Russian retail sales looks close to bottoming out, but any turnaround will be modest. This is one reason to think that the overall recovery in GDP growth will be weak and that the central bank’s easing cycle is likely to be deeper than …
23rd October 2019
Turkey’s financial markets have taken the US sanctions imposed yesterday in their stride, but the threat of harsher measures in the context of the country’s weak external position could result in a fresh sell-off in the coming days. This would act as a …
15th October 2019
The growing threat of sanctions on Turkey in relation to its recent incursion into Syria have already put significant downward pressure on Turkish financial assets and fragilities in the banking sector could precipitate even more severe problems. …
14th October 2019
The prospect of Turkish military action in Syria has again raised the spectre of US sanctions. While these would probably be on the soft end of the spectrum, Turkey’s poor external position means that the mere threat of more action would weigh on the lira …
8th October 2019
The deterioration in the external environment and willingness of the Hungarian MPC to look through above-target inflation means that monetary conditions are unlikely to change over the next twelve months. That said, we think that the central bank will …
20th September 2019
Turkey’s central bank looks set to cut interest rates further over the coming months, but past experience suggests that the easing cycle will be short and that renewed lira weakness will eventually force policymakers to reverse course. We expect rate …
17th September 2019
The Turkish central bank delivered another larger-than-expected interest rate cut today and we now expect the one-week repo rate to reach a trough at 12.50% (previously 16.00%). But if we’re right in expecting inflation to start rising again and the lira …
12th September 2019