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The strength of mortgage and unsecured consumer lending in Russia has concerned the central bank and raises the threat of a build-up of financial vulnerabilities, but for now we think these risks are low. Since we last looked at Russia’s mortgage boom in …
9th August 2021
Strong core inflation to trigger further rate hikes Although Russian headline inflation came in at a slightly-weaker-than expected 6.5% y/y, that masked a worryingly strong rise in core inflation that’s likely to trigger further monetary tightening. We …
6th August 2021
NBP’s doves losing their nerve… A slew of comments from policymakers at the National Bank of Poland (NBP) this week suggest that the probability of the central bank delivering a rate hike before the end of this year has increased. Flash July CPI data …
The Czech National Bank (CNB) raised its two-week repo rate by 25bp to 0.75% at today’s meeting, and its communications signalled that policymakers will raise rates more quickly than they had previously signalled to tackle above-target inflation. We …
5th August 2021
The widening of Romania’s current account deficit to a 10-year high partly reflects a rise in foreign firms’ reinvested earnings which is not a concern. But the trade balance has also worsened and the share of the deficit financed by stable forms of …
3rd August 2021
Inflation jumps again, but CBRT unlikely to respond with rate hike The further jump in Turkey’s headline inflation rate to 19.0% y/y in July is unlikely to trigger an interest rate hike but it will delay the start of an easing cycle until the back end of …
Supply disruption weighing on output in Czechia and Poland The PMIs for July suggest that supply chain disruptions weighed on output in Czechia and Poland and continued to put upward pressure on prices. Meanwhile, the releases suggest that manufacturing …
2nd August 2021
CBRT conceding the fight against inflation? Turkey’s central bank raised its inflation forecasts in its latest Inflation Report and Governor Kavcioglu’s comments suggest that policymakers are unlikely to step up to the plate in the fight against …
30th July 2021
Weaker-than-expected rebound as economy re-opens The disappointing 0.6% q/q expansion of Czech GDP in Q2 suggests that industry may have fared worse than expected as input shortages took a greater toll on output. With virus restrictions easing further …
Sentiment drops back, price pressures building The EC’s Economic Sentiment Indicators showed a surprising fall in regional sentiment in July, but we suspect that this was a blip rather than the start of a trend. We still expect growth to be strong in Q3, …
29th July 2021
Russia’s recovery continues at a solid pace in Q2 Russian activity data for June showed that the economy expanded at a solid pace in Q2, with overall GDP probably returning to just shy of its pre-pandemic level. While the re-opening boost will fade in Q3, …
28th July 2021
The region’s economies have continued to rebound strongly over the past month as virus outbreaks have largely been contained and restrictions have been lifted. Surveys of sentiment in the services sector have surged and high-frequency mobility data have …
The larger-than-expected 30bp interest rate hike by Hungary’s central bank (MNB) today was accompanied by hawkish comments that send a strong message about its intention to bring inflation back to its target. The tightening cycle is likely to be sharper …
27th July 2021
Delta variant unlikely to derail the recovery Concerns have grown over the past week about the spread of the Delta variant of COVID-19 but high vaccine coverage across much of the region has reduced the risk that policymakers will be forced to reimpose …
23rd July 2021
Russia’s central bank (CBR) opted for a larger 100bp interest rate hike, to 6.50%, at today’s meeting and the accompanying communications provided clear guidance that the tightening cycle is nearing an end. With inflation likely to rise further and …
A rise in virus cases in Israel has prompted the government to re-impose restrictions on activity, including mask mandates and vaccine certification for large events. There are signs that the Pfizer vaccine may be much less effective at preventing …
Overview – Rapid recoveries are underway across the region and GDP should return close to its pre-pandemic path sooner than in most other EM regions. While the spread of highly transmissible virus strains poses the greatest threat to the near-term …
21st July 2021
Economy loses a bit of momentum in June Polish industrial production and retail sales figures for June suggest that the rebound in economic activity softened a touch at the end of Q2, but GDP still looks to have expanded by 2.0% q/q in Q2. We think the …
Russian inflation shows no sign of letting up and looks set to remain above the central bank’s 4% target until at least the end of next year. With households’ inflation expectations also rising, we think the central bank will feel the need to step up the …
19th July 2021
Israel’s virus wave could be a warning for others The experience of Israel in recent weeks serves as a reminder that vaccine campaigns across Emerging Europe still have some way to go and that we are likely to have to learn to live with COVID long term. …
16th July 2021
Still few signs of widespread pressures building The rise in headline inflation in Israel to a near 8-year high of 1.7% y/y in June was largely a result of base effects that pushed up food inflation. The muted 0.1% m/m rise in prices suggests that …
15th July 2021
Industry holds up well but retail suffers during three-week lockdown Turkey’s activity figures for May, the month of a three-week national lockdown, showed that the industrial sector came through unscathed but that retail sales were hit hard. More timely …
13th July 2021
MNB to stay hawkish for now The surprisingly large rise in Hungarian inflation to 5.3% y/y in June – its highest rate in almost nine years – suggests that the risks to our interest rate forecast are skewed to the upside. The central bank (MNB) took a …
9th July 2021
Poland’s central bank left interest rates on hold today and, while it revised up its GDP growth and inflation forecasts, there was little sign in the accompanying press statement that the balance on the MPC has shifted further away from the ultra-dovish …
8th July 2021
Inflation rise will spook CBR The further rise in Russian inflation to a stronger-than-expected 6.5% y/y in June means the central bank (CBR) is likely to up the pace of tightening when it meets in a couple of weeks. A 75bp hike (to 6.25%) seems most …
7th July 2021
Turkish inflation hit a two-year high in June and recent domestic energy price hikes will cause it to rise even further over the next couple of months. High inflation and signs of a quick recovery from May’s lockdown mean that the central bank will …
Israel’s strong economic recovery prompted the central bank to phase out one of its emergency support programmes at today’s meeting and Governor Yaron’s comments suggest that the next step towards policy normalisation may involve the end of the bond …
5th July 2021
Inflation picks up, start of easing cycle likely to be delayed The fresh rise in Turkey’s headline inflation rate to 17.5% y/y in June, coupled with signs of a strong rebound in activity after May’s three-week lockdown, means that an interest rate cut in …
CBRT unlikely to win the war with dollarisation Turkey’s central bank (CBRT) took steps this week to tackle deposit dollarisation in the banking sector, but these efforts will fail to make headway in the absence of a stronger commitment to rein in high …
2nd July 2021
The Russian ruble appreciated to a one-year high against the dollar recently but we think the rally will fade as oil prices fall back and US Treasury yields rise further. That said, the central bank’s determination to rein in inflation should keep Russian …
Another strong batch of activity data for May suggest that Russia’s economy may have returned to just shy of its pre-pandemic level in Q2. The foundations are in place for the recovery to continue in Q3, but the latest virus wave and the possibility of a …
1st July 2021
Price pressures continue to mount The PMIs for June suggest that manufacturing sectors strengthened in Turkey, Czechia and Poland but weakened in Russia. Meanwhile, in Czechia and Poland, supply chain disruptions intensified, and there was further …
Strong recovery continues, price pressures building The EC’s Economic Sentiment Indicators showed a further rise in regional sentiment in June, driven by improvements in retail and services sectors. That said, there is also continued evidence of growing …
29th June 2021
Virus clouds lift over Turkey’s outlook The sharp improvement in Turkey’s virus situation has brightened the near-term outlook and presents a risk to our view that the central bank will start an aggressive easing cycle in the coming months. The number of …
25th June 2021
Economic activity across Emerging Europe is rebounding strongly now that virus waves have passed and restrictions have been lifted. High-frequency data show that mobility has surpassed its pre-pandemic level in most countries and vaccination programmes …
24th June 2021
The Czech National Bank (CNB) raised its two-week repo rate by 25bp to 0.50% at today’s meeting and the accompanying communications support our view that this marks the start of what will be the most aggressive tightening cycle in Europe. We expect that …
23rd June 2021
Hungary’s central bank (MNB) raised interest rates by 30bp today and with inflation set to remain above the MNB’s 4% upper tolerance level well into 2022, we expect an additional 60bp of tightening at the next three Inflation Report meetings. This would …
22nd June 2021
Economy roars back to life as restrictions lifted Polish retail sales rebounded strongly in May as restrictions were lifted, while industry continued to expand at a solid pace. GDP looks set to return to its pre-virus level in Q2 and we expect the …
While policymakers in Hungary and Czechia look set to lift interest rates from their pandemic lows later this week, we doubt that Poland’s central bank will follow suit this year. That said, with inflation in Poland set to be higher than we had previously …
21st June 2021
Surge in virus cases casts a dark cloud over Russia A surge in virus infections in Moscow and tightening of restrictions at a time when vaccine coverage is so low threatens to derail Russia’s economic recovery. New daily virus infections in Russia had …
18th June 2021
The statement accompanying today’s decision by the Turkish central bank (CBRT) to leave its policy rate at 19.00% suggests that policymakers are (for now) standing up to political pressure to lower interest rates. But we still think that an easing cycle …
17th June 2021
A further expansion of gas production is likely to boost Israel’s current account surplus by an additional 0.4% of GDP per annum by 2025. This will put upwards pressure on the real exchange rate, but Israel’s export composition means that this should not …
16th June 2021
Early signs of the re-opening pushing up core inflation The rise in inflation in Israel to 1.5% y/y in May was partly driven by food and energy, but there are some signs that underlying price pressures have increased. We think that inflation will rise …
15th June 2021
Russian household spending looks set to rebound strongly this year as “excess” savings are drawn down, credit continues to expand, government support boosts incomes, and the labour market recovers. This will keep inflation elevated for a while. But some …
Russian ruble gains as Biden-Putin summit nears The Russian ruble has appreciated markedly recently and the balance of forces now increasingly favours further gains. But a lot also depends on geopolitics; a positive outcome from the Biden-Putin summit …
11th June 2021
Russia’s central bank (CBR) raised its policy rate by another 50bp, to 5.50%, at today’s meeting and the accompanying communications delivered a much more hawkish tone about inflation risks and the need to raise interest rates further. With inflation set …
April figures point to fall in GDP in Q2 The m/m falls in Turkish industrial production and retail sales in April are likely to be followed by further weakness in May (when a three-week lockdown was in place). This supports our view that the economy will …
We now expect interest rates to rise across Central and Eastern Europe in the coming years and for all the major currencies to strengthen against the euro, with the Czech koruna and Polish zloty faring best. Until recently, currencies in Central and …
10th June 2021
While the composition of Central and Eastern European (CEE) exports is set to change over the coming quarters as some of the effects of the pandemic unwind, we forecast that export growth will remain strong, not least because of the solid economic …
The strength of Romania’s economy in Q1 and the positive outlook for growth over the coming quarters means that we now expect GDP to expand by 6.8% this year (compared to 4.8% previously) . The second estimate of Q1 GDP released today confirmed that …
8th June 2021
