Filtered by Subscriptions: Emerging Europe Economics Use setting Emerging Europe Economics
Inflation close to reaching a peak The further rise in Israeli inflation to 2.5% y/y in September contained no major surprises and we think it will ease towards the lower end of the central bank’s 1-3% target next year. Even so, with the recovery motoring …
15th October 2021
Central and Eastern Europe is one of the regions of the world where we think that the risk of sustained higher inflation in the next few years is greatest. The Phillips curve is alive and we think the combination of a cyclical recovery in demand for …
13th October 2021
Economy bounces back from weak start to Q3 Turkey’s industrial sector bounced back in August following a weak start to the quarter and, while retail sales growth slowed, it looks like the economy recorded another robust increase in GDP in Q3. Industrial …
12th October 2021
Poland-EU tensions crank up a notch The decision this week by Poland’s Constitutional Court to rule that some EU laws are in conflict with the Polish Constitution has sent shockwaves through Europe. The ruling gets to the heart of the conflict over the …
8th October 2021
The Bank of Israel revised up its forecast for GDP growth at today’s meeting and struck a more hawkish tone on inflation as it announced that it will end its asset purchase programme later this year. This was in line with expectations, but Governor Yaron …
7th October 2021
Inflation hits a new high, tightening cycle may continue for longer Russian inflation accelerated to a fresh five-year high of 7.4% y/y in September and, while this was mainly driven by a sharp increase in food inflation, the central bank is likely to …
6th October 2021
The National Bank of Poland (NBP) unexpectedly hiked its policy rate by 40bp to 0.50% at today’s MPC meeting, but the accompanying communications were underwhelming and suggest that the rate hike was not as hawkish a move as might have been first …
The Czech parliamentary election that kicks off on Friday looks to be one of the most unpredictable for some time. A victory for the incumbent ANO party would continue the recent trend of loose fiscal policy and support GDP growth, but at the cost of …
The National Bank of Romania (NBR) raised its policy rate by 25bp to 1.50% at today’s meeting, and the backdrop of rising inflation, large twin deficits and currency weakness means that further rate hikes are likely to be delivered over the next 12 …
5th October 2021
Inflation rises, but further rate cuts still on the cards Turkey’s headline inflation rate rose further to 19.6% y/y in September and core inflation partially reversed its recent decline, but political pressure means that the central bank is likely to cut …
4th October 2021
Industry coming off the boil, but consumer demand remains strong Russia’s hard activity data for August showed that industry has continued to struggle while loose fiscal policy has supported consumer spending. We think that consumer demand should hold up …
1st October 2021
CEE: loose fiscal policy set to persist in 2022 Government budget drafts approved for 2022 this week in Czechia and Poland and further details of social support in Hungary suggest that fiscal policy will remain supportive of growth in Central Europe and …
Supply constraints continue to weigh on output The manufacturing PMIs for September provide additional signs that supply constraints continued to weigh on output in Central Europe, although it seems that price pressures eased further. The PMIs for Czechia …
The Czech National Bank (CNB) stepped up the pace of its tightening cycle with a 75bp interest rate hike, to 1.50%, at today’s meeting and its hawkish communications signalled that further aggressive hikes will be delivered in the coming months to tackle …
30th September 2021
Economies across Emerging Europe enjoyed a rapid rebound in Q2, but all the signs suggest that the recovery has come off the boil in Q3. Surveys of sentiment in services sectors have started to flatline and, in some cases, fall. What’s more, hard activity …
29th September 2021
Sentiment falls again as recovery comes off the boil The continued fall in the EC’s Economic Sentiment Indicators for September provides further evidence that the regional recovery in Central and Eastern Europe has slowed in Q3 as supply disruptions have …
Last week’s surprise interest rate cut by Turkey’s central bank is particularly worrying given the backdrop of the country’s fragile external position. While the current account deficit has narrowed and the central bank’s net FX reserves have increased …
27th September 2021
Appetite for further monetary tightening wanes Central banks have started to slow tightening cycles in recent weeks and, in Turkey’s case, begin cutting interest rates. As inflation pressures ease, this pattern is likely to continue. But the Czech …
24th September 2021
Turkey’s central bank (CBRT) unexpectedly cut its one-week repo rate by 100bp to 18.00% today, despite the further rise in inflation in August, and we now think that further aggressive easing is likely over the coming year. But this could ultimately sow …
23rd September 2021
Hungary’s central bank (MNB) slowed the pace of its tightening cycle today, raising its base rate by a smaller-than-expected 15bp to 1.65%, and the post-meeting communications signalled that future rate hikes will remain at the smaller end of the …
21st September 2021
Recovery losing steam Poland’s economy appeared to lose steam in August amid signs that global chip shortages started to weigh on industrial output and retail sales failed to reverse a dip in July. We still think that GDP will rise by a robust 1.5% q/q …
Energy prices adding to inflationary pressures The recent surge in European gas and coal prices will push headline inflation further above central bank’s targets in most countries in the coming months. European coal and natural gas prices have surged over …
17th September 2021
A victory for United Russia in the Duma elections this week will strengthen the government’s recent focus on state intervention in the economy. Social redistribution has become a key priority for the government and large businesses may end up paying for …
15th September 2021
Signs that re-opening inflation is fading The rise in Israeli inflation to an 8-year high of 2.2% y/y in August was partly driven by a chunky rise in housing costs, but there are signs that “re-opening inflation” in services has run its course. We think …
14th September 2021
Weak start for Turkey’s economy in Q3 Turkey’s industrial production and retail sales figures for July suggest that, after putting in a better-than-expected performance in Q2, the economy made a soft start to Q3. Industrial production contracted by 4.2% …
13th September 2021
Rule of law dispute escalates in Poland The Poland-EU dispute over the rule of law reached a breaking point this week and raises the threat of potential fines and a significant delay to receiving EU recovery funds in the coming months. This week brought …
10th September 2021
Russia’s central bank (CBR) slowed down its monetary tightening cycle with a 25bp interest rate hike, to 6.75% at today’s meeting and the accompanying communications suggest that there may be just one more 25bp rate hike, to 7.00%, in this cycle. The …
Inflation hits fresh five-year high, tightening cycle not over Russian inflation rose to a fresh five-year high of 6.7% y/y in August and, while there are some tentative signs that price pressures have started to soften recently, we think the central …
8th September 2021
We estimate that households in Poland, Czechia and Hungary have accumulated “excess” savings worth 4% of GDP so far during the pandemic and this stockpile looks set to grow further in the coming quarters. We don’t expect these excess savings to be spent, …
Poland’s inflation surge splits opinion at the NBP The surge in Polish inflation to a fresh two-decade high in August has shown no sign of prompting a more hawkish shift at the central bank. But with inflation likely to remain stuck above target for some …
3rd September 2021
Inflation jump to delay start of easing cycle The stronger-than-expected Turkish inflation reading of 19.3% y/y in August doesn’t rule out the start of an easing cycle later this year. However, we now only see scope for an interest rate cut at the final …
Economy starting Q3 on decent footing Russia’s activity data for July show that industrial production has come off the boil, but retail sales continued to expand strongly, and the strength of consumer demand will probably keep the central bank in …
1st September 2021
Manufacturing conditions normalise as supply disruptions ease The PMIs for August suggest that manufacturing conditions have softened in Q3 as output and new orders fell further from their recent highs. More than anything, it looks like conditions are …
Economy shrugs off lockdown and expands in Q2 A strong rebound from May’s three-week lockdown meant that Turkey’s economy managed to expand by 0.9% q/q over Q2 as a whole and the early signs are that it carried this momentum into Q3. Robust growth and …
Russia dips into the pre-election playbook Russia’s government this week unveiled new lump-sum payments to pensioners and military personnel ahead of September’s election, strengthening our above-consensus views on inflation and rates. The government will …
27th August 2021
Recoveries across Emerging Europe accelerated in Q2 as the easing of virus restrictions pushed GDP to, or above, pre-pandemic levels in most countries and we think this momentum will continue in Q3. However, the recovery has been accompanied by a marked …
26th August 2021
Intermediate goods shortages and pandemic-related supply constraints across Central and Eastern Europe (CEE) are not going to disappear overnight and may hold back the pace of recovery in certain sectors. But they should eventually ease and we remain …
25th August 2021
Hungary’s central bank (MNB) raised its base rate by another 30bp, to 1.50%, as expected today but also dropped its commitment to raise interest rates on a monthly basis which suggests that the tightening cycle will probably slow after September’s …
24th August 2021
Israel’s central bank (BoI) sounded more cautious about the outlook at today’s MPC meeting given the rise in virus cases and tightening of containment measures. Provided the third booster jab is effective and restrictions are not tightened significantly, …
23rd August 2021
The past month has seen a growing divergence in COVID-19 outbreaks across the region, with cases still very low in Central Europe but surging in Israel and Turkey. Either way, it appears that restrictions will remain light touch and economic recoveries …
Fiscal risks bubbling under the surface in Romania Romania’s new finance minister, Dan Vilceanu, has a tough job ahead to keep the public finances on a sustainable path and this will be made all the harder by suggestions from PM Citu to spend the windfall …
20th August 2021
Retail sales drop, but industry continues to thrive Polish industrial production continued to expand at a solid pace in July while retail sales fell as the re-opening of the economy shifted spending away from goods. The big picture is that the economy …
The spread of the highly transmissible Delta variant has driven a sharp rise in virus cases, hospitalisations and deaths in Israel this month. Evidence of waning vaccine efficacy prompted the government to roll out third booster jabs at the start of …
18th August 2021
Re-opening boost pushes CEE economies above pre-pandemic levels The Q2 GDP data for Central and Eastern Europe revealed that the regional recovery gathered pace last quarter as economies reopened following virus waves in Q1. We expect the recovery to …
17th August 2021
Re-opening boost pushes economy far above pre-pandemic level The larger-than-expected 15.4% annualised expansion in Israeli GDP in Q2 took the economy to more than 3% above its pre-pandemic level. While we expect growth to slow markedly in Q3 as the …
16th August 2021
Strong GDP growth takes economy back to pre-pandemic level The larger-than-expected 10.3% y/y expansion in Russian GDP in Q2 suggests that the economy returned to its pre-pandemic level as growth was driven by broad-based strength across sectors. Growth …
13th August 2021
Wrapping up a week of instability in Poland Poland's political scene was thrust into uncertainty this week after President Duda dismissed Jaroslaw Gowin, the leader of one of the coalition partners, from his duties and his Agreement party pulled out of …
Strong GDP growth to give the NBP food for thought The 1.9% q/q expansion in Poland’s GDP in Q2 left the economy 0.5% above its pre-pandemic size and we expect another strong reading for Q3 as activity in consumer-facing sectors continues to recover. …
Turkey’s central bank (CBRT) left interest rates on hold at 19.00% today and, with inflation likely to remain elevated over the coming months and the economy having bounced back quickly from May’s lockdown, an easing cycle is unlikely to commence until …
12th August 2021
Economy bounces back quickly from lockdown Turkey’s industrial production and retail sales figures for June confirm that the economy bounced back quickly from May’s three-week lockdown. This, coming alongside the further jump in inflation in July, means …
