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We held an online Drop-In session today to discuss the Biden administration’s new tariffs on goods from China. (See a recording here .) This Update answers several of the questions that we received about the direct effects of the tariffs and what they say …
15th May 2024
The fiscal tightening steps announced by Turkey’s finance ministry today, which include a freeze on most public construction projects, will help to prevent the large budget deficit from widening even further this year and contribute to the rebalancing …
13th May 2024
Private sector savings surged in Israel during the pandemic and jumped again last year amid the war in Gaza. We estimate that those built up due to the war are equivalent to around 3.0% of GDP and could be used to fund consumption, particularly if …
9th May 2024
The decision by Turkey last week to suspend all goods trade with Israel until there is a permanent ceasefire in the war in Gaza is unlikely to have a major macroeconomic impact in either country, although Israel’s construction sector appears vulnerable …
7th May 2024
Slight hawkish shift at the CNB, but rates to fall further than most expect The communications accompanying the decision by the Czech National Bank (CNB) to cut its policy rate by 50bp again today (to 5.25%) were slightly more hawkish than expected, but …
2nd May 2024
On Tuesday we held a Drop-in on the outlook for the German economy. This Update summarises the key points that we discussed and answers some of the questions that we received during the event. 1. Do the Q1 GDP data mean Germany is out of recession? The …
The Polish government’s white paper on Monday set out a scathing review of the previous government’s fiscal record and highlighted the challenges facing the public finances, but if we’ve learned anything from the report it is that the government will take …
30th April 2024
The policy shifts underway in Turkey, Nigeria, Argentina and Egypt have ticked a lot of the right boxes so far, but it will take years for the full economic benefits to materialise and require policymakers to remain committed to reforms. We’re most …
24th April 2024
This publication has been updated with additional analysis since the post-meeting press statement and press conference. MNB shifting down the monetary easing gears The communications accompanying the decision by the Hungarian central bank (MNB) to opt for …
23rd April 2024
The continued weakness in the German economy that we expect over the rest of this decade presents a challenge to the export-orientated economies of Central and Eastern Europe (CEE). While GDP growth is likely to be slower in CEE over the coming years than …
18th April 2024
The risk premia on Turkish assets are now low relative to the past decade or so. We think that will remain the case over the coming quarters, given the positive global risk-on attitude and the ongoing shift to traditional macroeconomic policy. Even so, …
We think that any impact from the suspension of trading of Russian metal on the LME and CME is likely to be muted, given that trade flows have already shifted markedly and it is unlikely to impact supply. The US and UK announced fresh sanctions on Russia …
15th April 2024
The Iranian strike over the weekend has been largely shrugged off by Israel’s financial markets and on its own is unlikely to have a major impact on the economy. The key uncertainty now is how Israel responds. An aggressive Israeli military response that …
While inflation fell further across Central and Eastern Europe (CEE) in March, we think that the recent run of good CPI news is largely over. We expect inflation to rise back above central banks’ target ranges in Hungary and Poland by end-2024 (to near …
11th April 2024
The strong showing for the opposition in Turkey’s local elections on Sunday highlights the extent of voter frustration with high inflation and we think that it should be interpreted as a positive for investors by strengthening policymakers’ commitment to …
2nd April 2024
Vladimir Putin secured a record victory in Russia’s presidential election over the weekend. The focus now will be on whether this emboldens Putin to devote more resources to the war effort, whether policymakers push through unpopular non-war fiscal …
18th March 2024
Turkey’s balance of payments figures for January showed that the current account deficit continued to narrow, but the drop in capital inflows in recent months is a concern and it appears that this forced the central bank to sell FX reserves. This adds to …
12th March 2024
Romania’s large twin budget and current account deficits remain a key concern. One near-term risk is that fiscal policy stays very loose (or is loosened further), particularly in view of elections taking place later this year. This could cause risk …
28th February 2024
The Czech economy has had the weakest performance of any EU country since the pandemic, and we think that growth will disappoint expectations again in 2024. This will keep inflation contained and put pressure on the central bank to loosen monetary …
16th February 2024
CNB steps up its easing cycle The Czech National Bank (CNB) accelerated the pace of its monetary easing cycle today with a 50bp interest rate cut, to 6.25%, and the post-meeting communications support our view that an even larger interest rate cut is on …
8th February 2024
MNB errs on the side of caution The Hungarian central bank’s (MNB’s) communications following its meeting today confirm that the decision not to accelerate the pace of its easing cycle was due to the recent ratcheting up of tensions between the government …
30th January 2024
Were the EU to block Hungary’s access to funds (if it vetoes financing for Ukraine at this week’s summit), as reports on Sunday suggested, this would probably have a smaller direct impact on Hungary’s economy and financial markets than most would think. …
29th January 2024
The fading energy crisis and the falls in inflation and interest rates generated a more positive mood about the economic outlook at Euromoney’s Central and Eastern European (CEE) forum in Vienna this week compared with last year. But ongoing labour …
18th January 2024
Communications from the governor of the National Bank of Poland (NBP) today suggest to us that policymakers could cut interest rates again at the central bank’s March meeting. But we think core inflation will remain above the central bank’s target until …
10th January 2024
This page has been updated with additional analysis from the post-meeting press statement and press conference. CNB kicks off its easing cycle The Czech National Bank (CNB) maintained a hawkish tone as it started its easing cycle today, but we still think …
21st December 2023
Turkey’s gross international reserves have hit a record high recently which, on the face of it, suggests that the policy U-turn since May has helped to diminish the country’s balance of payments vulnerabilities. But the central bank’s large on- and …
14th December 2023
In this Global Economics Update , we describe eight of the biggest risks to our economic forecasts for 2024. The unusual nature of this cycle and uncertainties surrounding the transmission of monetary policy mean that the biggest risks relate to central …
30th November 2023
The Israeli government’s budget deficit is widening sharply and we think it will breach 5% of GDP next year. Provided the length of the war and the increase in the deficit are short-lived, we don’t think this will cause funding problems and the …
22nd November 2023
The squeeze on Russia’s budget and current account positions has eased over the second half of this year, largely thanks to a rise in oil prices. Higher energy revenues next year should help to limit the impact of a surge in military spending on the …
15th November 2023
Governments across Central and Eastern Europe (CEE) need to deliver significant fiscal tightening over the coming years to prevent public debt ratios from grinding higher. The risk of an imminent fiscal crisis across the region looks low relative to many …
9th November 2023
This publication has been updated with additional analysis from the post-meeting press statement and press conference. CNB in ‘wait and see’ mode The Czech National Bank’s (CNB’s) decision to leave interest rates on hold again today, at 7.00%, was …
2nd November 2023
One question we have received frequently from clients is what lessons Israel’s previous wars offer when thinking about the effects on its economy from the conflict today. While no two events are the same, one lesson is that the near-term hit to economic …
1st November 2023
This page has been updated with additional analysis from the post-meeting press statement and press conference. MNB slows the pace of easing, but only slightly The Hungarian central bank’s (MNB’s) larger-than-expected 75bp cut to its base rate, from …
24th October 2023
The Bank of Israel (BoI) left its policy rate on hold at 4.75% today and, while its communications provided little firm policy guidance, policymakers clearly have one eye on the currency and will probably keep rates unchanged while inflation risks remain …
23rd October 2023
The exit poll from Poland’s parliamentary election on Sunday suggests that the incumbent PiS will fall short of forming a majority and that the pro-EU opposition will be able to form a coalition government. This would help to improve relations with the EU …
16th October 2023
The attack by Hamas on Israel on Saturday has led to widespread casualties and deaths, and the declaration of war by Israel’s prime minister. From an economic perspective, the experience from the 2014 Gaza war suggests that the effects on Israel’s economy …
9th October 2023
The sell-off in bond markets has taken a breather today, helped in part by softer data on the US labour market. However, the scale of the moves over the past week has invoked comparisons to previous financial crises that have been caused by sharp moves in …
4th October 2023
The Hungarian central bank (MNB) delivered another 100bp interest rate cut (to 13.00%) and simplified its monetary policy toolkit at today’s meeting, paving the way for the second phase of the easing cycle in the coming months. The hawkish tone of the …
26th September 2023
There’s a lot of uncertainty about how much impact monetary tightening has had in the global economy so far, but in Central and Eastern Europe (CEE) the hit to households has already been significant and we estimate that almost all of the impact from …
18th September 2023
The Bank of Israel (BoI) left its policy rate on hold again today, at 4.75%, and while our baseline forecast is that the tightening cycle is now over, the BoI’s hawkish comments support our view that it won’t turn to interest rate cuts until Q2 next year …
4th September 2023
Turkey’s policy shift has ticked a lot of the right boxes so far and the central bank’s large rate hike this month will go a long way to rebuilding confidence among investors. But there are still question marks about how much tightening will be delivered …
31st August 2023
Equities in Europe, the Middle East and Africa (EMEA) have returned little in US$ terms so far this year. While they may fare better next year, we doubt they’ll outperform the wider emerging equity market. Equities in EMEA, although marginally ahead of …
29th August 2023
Exceptionally high inflation in the major economies of Central and Eastern Europe (CEE) relative to elsewhere has left their currencies overvalued against the US dollar and on a trade-weighted basis in our view. We think there is scope for these …
16th August 2023
The decision by Russia’s central bank to increase its policy rate by 350bp, to 12.00%, at an unscheduled meeting today underscores the challenges that policymakers are now facing to maintain macroeconomic stability in an economy that is being distorted by …
15th August 2023
Economies in Central and Eastern Europe (CEE) have experienced large and persistent net migration outflows in recent decades, but the tide has shifted in the past five years or so as outflows have dropped sharply. This is likely to continue, with net …
7th August 2023
3rd August 2023
The Israeli government’s decision to press ahead with its controversial judicial reforms won’t necessarily cause foreign investment into Israel to dry up, but the direction of policymaking threatens to push the economy onto a permanently lower growth …
25th July 2023
The Bank of Israel (BoI) kept its policy rate on hold at 4.75% today, but its communications acknowledged the risk of having to hike rates again in the coming months if inflation data warrant it. We think they will and we expect the central bank to …
10th July 2023
Labour markets across Central and Eastern Europe (CEE) have remained tight over the past year despite the weakness in economic activity and we think this will remain the case as recoveries gather pace into 2024 and structural demographic headwinds remain …
6th July 2023
The armed uprising by Yevgeny Prigozhin’s Wagner mercenary group against the Russian military over the weekend has dealt a heavy blow to President Putin and exposed cracks in the regime. There are a lot of unknowns about how things will play out at this …
26th June 2023