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Inflation stabilises, rates to be left on hold Russia’s headline inflation rate held steady at 9.1% y/y in August which, while slightly stronger than expected, won’t tip the balance towards another interest rate hike at the central bank’s meeting on …
11th September 2024
Turkish officials expecting a goldilocks rebalancing The medium-term economic programme presented by Turkey’s government this week highlights that policymakers remain committed to orthodox policies to deal with the country’s large macroeconomic …
6th September 2024
NBP likely to remain on pause as inflation rebounds The decision by the National Bank of Poland (NBP) to leave its policy rate on hold today, at 5.75%, was widely expected by analysts, and the incoming data are supporting our view that there won’t be …
4th September 2024
Disinflation process has some way to go The fall in Turkish inflation, to 52.0% y/y, in August is likely to be followed by continued disinflation over the coming months. But there are signs in the breakdown that underlying inflation pressures remain …
3rd September 2024
PMIs increase, but still consistent with weak industrial activity The manufacturing PMIs increased across most of the region in August, although they generally remain at weak levels and suggest that industry has continued to struggle in Q3. In Poland and …
2nd September 2024
Rebalancing still a bumpy process The Turkish GDP figures for Q2, which showed a better-than-expected 0.1% q/q expansion in output, suggest that the rebalancing process still has some way to go. The data argue in favour of the central bank keeping …
Further signs of fiscal complacency in Poland The Polish government’s draft budget for 2025 announced this week suggests that fiscal policy will be more expansionary than we had previously expected next year. While that poses an upside risk to our …
30th August 2024
Modest increase in sentiment The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) generally edged higher in August, which suggests that the regional economic recovery has continued, albeit at a moderate pace, this …
29th August 2024
Growth steadies at the start of Q3 The latest Russian industrial production and retail sales figures for July were a mixed bag and suggest that the economy maintained a steady pace of growth at the start of this quarter. But we still think GDP growth will …
28th August 2024
Rates on hold while geopolitical uncertainty remains The decision by the Bank of Israel (BoI) to leave its policy rate on hold again today (at 4.50%) rather than resume the easing cycle, reflects policymakers’ concerns with supply-side constraints in the …
Rates left on hold, easing cycle will be more “stop-start” from here The Hungarian central bank (MNB) suggested that its decision to leave the policy rate on hold today, at 6.75%, was likely to mark a temporary pause in the easing cycle, rather than an …
27th August 2024
Ukraine’s surprise incursion Ukraine’s incursion into Russia continued this week. Ukraine found a weak spot in Russian defences two weeks ago and mobilised resources to exploit it. The scale of the incursion is significant, with some suggesting that …
23rd August 2024
The Q2 GDP data out of Emerging Europe have generally disappointed to the downside, and leading indicators have weakened at the start of Q3. With interest rates likely to be kept high in Russia and Turkey over the coming months, we think that a further …
22nd August 2024
A soft start to Q3 The weaker-than-expected batch of Polish activity figures for July is more likely to be a blip than the start of a soft patch. We remain comfortable with our view that Poland’s economy will expand by around 3% over the year as a whole, …
CBRT staying the course The Turkish central bank (CBRT) left its main policy rate unchanged again today, at 50.00%, and offered little sign that it will soon start an easing cycle. While most other analysts expect monetary loosening to start in Q4, we …
20th August 2024
Israel’s economy slowed more than expected in Q2 as weak investment and supply constraints continued to hold back activity. A ceasefire to halt the conflict in Gaza would clearly be positive for the near-term growth outlook, but we doubt the economy would …
19th August 2024
The global macroeconomic risks surrounding a possible ceasefire deal between Israel and Hamas are asymmetric. An agreement – while having significant economic consequences for countries in the region – would probably not itself be a game-changer for …
Poland the region’s star in Q2 Perhaps the standout feature of the data released in the region this week was the strength of Polish GDP in Q2. Output expanded by a bumper 1.5% q/q, its fastest pace since Q1 2022. (See our initial take here .) The data …
16th August 2024
Strong second quarter will dampen expectations for rate cuts The larger-than-expected pick-up in Polish GDP growth in Q2, to 1.5% q/q (from 0.8% in Q1), suggests that the risks to our forecast for GDP to expand by 3% over the year as a whole are now …
14th August 2024
Signs of a thaw in frosty relations between India and China don’t point to a fundamental realignment in India’s position in a fracturing global economy. But they highlight a growing theme of some EMs tactically courting investment from China to put …
13th August 2024
Economy slows in Q2, but headline inflation rises further The slowdown in Russian GDP growth in Q2, to 4.0% y/y, suggests that the economy has lost a bit of momentum. But overheating pressures remain alive and the increase in inflation to 9.1% y/y in July …
9th August 2024
US recession fears grip global markets ... The turmoil in global financial markets late last week and early this week has been followed by some stabilisation over the past few days, but the situation remains fluid and you can find all our analysis on the …
Easing cycle continues, but space for further cuts is narrow Romania’s central bank (NBR) delivered another 25bp cut to its policy rate today, to 6.50%, but in spite of the slightly more dovish accompanying statement, we think that the space for further …
7th August 2024
Fears of a US recession have rattled EM equity markets at a time when EM economies themselves are showing more pronounced signs of weakness. Most EM currencies have held up well, suggesting a dovish tilt may come from EM central banks – particularly those …
5th August 2024
Disinflation process underway, but it will take time The large fall in headline inflation in Turkey in July will provide some comfort to the central bank that the disinflation process remains on track, although it will take time for policymakers to be …
We will be holding a Drop-In next Thursday at 15.00 BST discussing financial risk across the EM world. Register for the 20-minute online briefing here . Tensions in the Middle East rising after Israeli strikes The rocket strike on the Israeli-occupied …
2nd August 2024
CNB slows easing cycle, but rates will still fall further than many expect Czech National Bank (CNB) Governor Michl sounded fairly cautious in his guidance about the future course of the easing cycle in the post-meeting press conference. But the …
1st August 2024
PMIs point to softer demand in Russia and Turkey The manufacturing PMIs for July suggest that industrial sectors lost a bit of momentum in Turkey and Russia at the start of Q3, although demand conditions still appear very strong in Russia. In both …
Activity softens a touch at the end of Q2 Russia’s economy lost a bit of steam in June, but it still looks like GDP growth over Q2 as a whole was very strong, with growth tracking at 4.5-5.0% y/y. Industrial production growth slowed from 5.3% y/y in May …
31st July 2024
Further signs of recovery losing momentum The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) generally fell in July, and our regional-weighted measure hit a five-month low, providing additional evidence that the …
30th July 2024
Recoveries stutter in Q2 The weaker-than-expected Q2 GDP data out of Czechia and Hungary show that weak external demand is still acting as a constraint on the speed of recoveries in Central Europe. While we expect growth to strengthen over the second half …
The rocket strike on the Israeli-occupied Golan Heights over the weekend has heightened fears of a full-blown conflict between Israel and Hezbollah in Lebanon. For Israel, this risks adding to pressure on its already strained public finances, and would …
29th July 2024
Ukraine reaches a deal Ukraine’s government agreed a preliminary deal on Monday with a group of private creditors to restructure $20bn of its external debt. As part of the deal, Ukraine will receive a 37% haircut on its bonds, and the average maturity …
26th July 2024
CBR delivers bumper hike, leaves door open for further tightening Russia’s central bank (CBR) stepped up to the plate with a 200bp hike to its key policy rate today, to 18.00%, in response to the overheating economy and a renewed surge in inflation. While …
Donald Trump has said that he could quickly end the war in Ukraine if he is re-elected as US President. This Focus answers key questions on what the shape of any agreement might look like, what might happen to sanctions on Russia, and the possible …
23rd July 2024
Easing cycle continues The Hungarian central bank (MNB) cut interest rates by 25bp again today, to 6.75%, and the post-meeting press conference suggests that, while there are some MPC members who want to pause the easing cycle, the balance is a bit more …
Rates on hold, cuts still some way off Turkey’s central bank left its key policy rate on hold today, at 50.00%, and the communications accompanying the decision suggest that interest rate cuts are still some way off. While most analysts expect a monetary …
Economic recovery still on track Poland’s retail sales data released today were slightly weaker than expected, but the big picture is that the whole set of activity data for June suggest that the economic recovery has remained relatively strong. Taken …
22nd July 2024
External positions in good health ... Romania aside Balance of payments data released across the region this week showed that current account positions generally deteriorated in May. Poland recorded a monthly deficit of €63m, while Czechia had an external …
19th July 2024
The latest data out of Emerging Europe suggest that economic growth in Central Europe strengthened further in Q2, while Russia’s economy continued to overheat. In Turkey there are signs that demand may be beginning to moderate in response to policy …
18th July 2024
Narrowing in Hungary’s budget deficit may not last Hungary’s government announced a new set of measures this week to increase tax revenues and to avoid the budget deficit slipping below its target this year. The government said that firms that have …
12th July 2024
Inflation strengthens, rate hike baked in later this month The rise in Russian inflation to 8.6% y/y in June, alongside weekly figures suggesting that an even larger rise is possible in July, seals the deal on an interest rate hike later this month. We …
10th July 2024
At first sight, the latest CPI data out of Central and Eastern Europe (CEE) might seem to provide central banks reason for comfort. But a look under the surface paints a more worrying picture: underlying core price pressures in some countries have re …
Turkey’s economy has maintained strong external price competitiveness since the pandemic (mirrored by rapid export growth). But measures of competitiveness have shown a noticeable decline in the past year and will deteriorate further against a backdrop of …
9th July 2024
This page has been updated with additional analysis since first publication. Rates on hold amid elevated risks Israel’s central bank (BoI) left its policy rate on hold at 4.50% as expected today and interest rates are likely to remain on hold for the time …
8th July 2024
Hawks rule the roost Inflation data out of the region this week as well as comments from central banks strengthen the view in our recent Outlook that interest rates are likely to be hiked again in some places (Russia) and kept on hold for longer than most …
5th July 2024
Easing cycle underway, but expect it to be gradual Romania’s central bank (NBR) started its easing cycle at today’s meeting with a 25bp rate cut, to 6.75%. But with inflation and fiscal risks still high, this is likely to be a slow and gradual cycle and …
Activity running hot, inflation rising further The latest activity data suggest that Russia’s economy continued to motor along in May, driven by stronger growth in industry. The economy is clearly overheating and this continues to fuel inflation …
3rd July 2024
No rate cuts for another year or so The decision by Poland’s central bank (NBP) to leave its policy rate at 5.75% today came as no surprise and we doubt that policymakers will have scope to lower interest rates until the middle of next year. The NBP …
Inflation on a (bumpy) path down The larger-than-expected decline in Turkish inflation in June marks the start of a new phase of the disinflation process, and we are likely to see much steeper falls in the y/y inflation rate in July and August. But …
