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Weaker ruble feeding into stronger price pressures Russian inflation jumped to 4.0% y/y in October as the weakness in the ruble continued to feed into stronger consumer prices. There’s now a greater chance that inflation peaks at a higher level than we …
6th November 2020
Poland’s central bank left its policy rate on hold at 0.10% at today’s MPC meeting and opted to reinforce its commitment to its asset purchase programme rather than announce new unconventional measures. These asset purchases are likely to work in tandem …
The Czech National Bank (CNB) kept interest rates on hold at today’s MPC meeting and, despite its downbeat view on the economic outlook, gave no hint that monetary policy would be loosened further. We expect interest rates to remain on hold for some time …
5th November 2020
The Turkish lira has continued to fall sharply over the past couple of days and pressure is mounting on the central bank (CBRT) to deliver aggressive policy rate hikes at the MPC meeting later this month (if not before). But the political backdrop means …
3rd November 2020
Inflation begins steady rise, adding to pressure on CBRT Turkey’s headline inflation rate edged up to 11.9% y/y in October and is likely to rise further over the coming months. This, combined with the recent sharp falls in the lira, means that the central …
Strength in October to prove short-lived The PMIs for October were fairly strong across the region and suggest that industry continued to recover last month. However, they probably understated the impact of the latest virus restrictions in CEE and we …
2nd November 2020
Is Turkey set for an emergency rate hike? Last week’s interest rate decision by Turkey’s central bank has come back to bite hard, but talk of an emergency rate hike may be a little premature. Unsurprisingly, the decision to tweak the interest rate …
30th October 2020
A Biden presidency would probably result in a tougher US foreign policy stance against both Russia and Turkey, paving the way for a further deterioration in relations, an increased risk of tighter sanctions, and an acceleration in both countries’ recent …
Strong rebound, but a renewed downturn incoming The 6.2% q/q rebound in Czech GDP in Q3 was stronger than expected, but this predated the surge in virus infections and tightening of restrictions which we expect to cause a renewed contraction in Q4. This …
Sentiment takes a hit amid renewed virus surge The small fall in the EC’s Economic Sentiment Indicators for October is consistent with the region’s recovery stalling this month. But given that the data collection period for October predates the tightening …
29th October 2020
The coronavirus outbreak across the region has gone from bad to worse. The Czech Republic has one of the highest per capita infection rates in the world and the two-week national lockdown until November 3 rd has already hit activity in certain sectors. …
28th October 2020
The Turkish lira has fallen sharply in recent days amid concerns about the central bank’s decision making, rising geopolitical tensions, and the backdrop of a dire external position. The experience from previous sell-offs is that most of the fall in the …
So much for the optimism about Russia’s recovery… Russia’s economy lost a lot of steam at the end of Q3 as the recovery in consumer spending over the summer reversed. (See here .) The rebound was supported by social transfers from the government and the …
23rd October 2020
The decision by Russia’s central bank to leave its policy rate at 4.25% today suggests that inflationary concerns are preventing further easing for now. But the communications reinforce our view that interest rates are likely to be cut next year to 3.50%; …
Overview – Fresh virus outbreaks and tighter containment measures mean that the economies of Emerging Europe are likely to suffer a fresh downturn in Q4, but we still think that the region will bounce back more strongly from the crisis than many other …
22nd October 2020
Turkey’s central bank (CBRT) left its benchmark one-week repo rate unchanged at 10.25% today but adjusted its other policy rates to give it more scope to tighten monetary conditions via the ‘corridor’. Political pressure is clearly making the CBRT …
Strong Q3, but a renewed downturn lies ahead in Q4 September’s batch of Polish activity data confirmed that the economy rebounded strongly in Q3, with GDP growth likely to have increased from -8.2% y/y in Q2 to -2.5% y/y. But this strength came before the …
21st October 2020
A very disappointing end to the third quarter There were few positives in September’s batch of Russian activity data as the contraction in retail sales deepened and the recovery in the manufacturing sector stalled. The rise in virus cases and tightening …
20th October 2020
Headwinds facing Czech economy growing The Czech government this week announced stricter containment measures for the next three weeks in an effort to control the surge in COVID-19 cases which, on a per capita basis, is now the worst globally. Last week, …
16th October 2020
The coronavirus crisis has already dealt a heavy blow to the Ukrainian economy and the risks to the outlook are growing: recent challenges to the independence of the central bank and anti-corruption institutions threaten to undermine the IMF deal agreed …
14th October 2020
Strong recovery set to lose steam Turkey’s industrial production and retail sales data for August add to the evidence that the recovery has remained strong, although the figures appear to have been flattered by a shift in the timing of maintenance …
13th October 2020
The speed and scale of the rise in coronavirus infections across Emerging Europe has prompted a response from the authorities, but policymakers are likely to turn to much broader and tighter restrictions that affect more areas of economic activity. This …
12th October 2020
Activity data show recovery stalled in August… The latest batch of activity data for CEE disappointed in August. Growth in Czech retail sales failed to gain pace and sales slipped back into a year-on-year contraction in Hungary. The level of sales in …
9th October 2020
The conflict between Armenia and Azerbaijan in the disputed region of Nagorno-Karabakh has created yet another schism in Turkey’s relations with the US, the EU and Russia. It may only take a misstep in the conflict to trigger an escalation of geopolitical …
8th October 2020
Rising inflation to prompt pause in monetary easing Russian inflation edged up to 3.7% y/y in September and we think that it will rise a bit further over the coming months, which is likely to prompt the central bank to pause its easing cycle at its …
6th October 2020
The surge in coronavirus cases in Russia looks set to trigger tighter restrictions in the coming months. But we doubt that policymakers will re-introduce a full lockdown. After all, it would be politically infeasible to do so at the same time as they …
Inflation steady but set to rise, prompting more monetary tightening Turkey’s headline inflation rate was unchanged for a third consecutive month at 11.8% y/y in September but we expect it to rise over the coming months. And with the lira still under …
5th October 2020
Geopolitical risks grow for Turkey The conflict in Nagorno-Karabakh has opened up another schism between Turkey, the EU and Russia. An escalation in tensions could trigger sharp falls in the lira and push the central bank into more aggressive monetary …
2nd October 2020
A collapse in foreign firms’ reinvested earnings and a stronger recovery in goods exports than imports have caused Poland’s current account surplus to swell to record levels during the pandemic. While some of these factors are likely to fade, we think …
Pace of the manufacturing rebound slows in September The mixed batch of manufacturing PMIs across Emerging Europe for September suggest that the initial rebound in activity over the summer started to run out of steam at the end of Q3. The recovery is …
1st October 2020
Surge in virus cases yet to weigh on sentiment The further rise in the EC’s Economic Sentiment Indicators for September suggests that the recovery continued this month, albeit at a slower pace. However, we suspect that the recent rise in virus cases …
29th September 2020
Currency concerns prompt interest rate hikes Central banks in Hungary and Turkey unexpectedly raised interest rates this week amid mounting concern about currency falls and inflation. While we think that this will ultimately be reversed in Hungary, …
25th September 2020
The Turkish central bank’s (CBRT’s) decision to hike its policy rates by 200bp today is a response to the recent lira weakness, and should help to restore the Bank’s battered credibility. The move gives the CBRT more room to tighten monetary conditions …
24th September 2020
The speed and size of the rise in new coronavirus cases in parts of Central and Eastern Europe is now starting to challenge our optimism about the strength of the recovery. The Czech Republic, Hungary and Slovakia are experiencing among the worst …
The Turkish lira has continued to weaken in recent weeks and, with the response by policymakers likely to fail to placate investors, we now expect the currency to fall to as low as 9.25/$ by the end of next year. What’s more, the risks lie firmly towards …
23rd September 2020
The decision by Hungary’s central bank to leave its base rate on hold at 0.60% today highlights that the central bank is in a bind due to high inflation and concerns about the forint. Further interest rate cuts are likely to remain off the table and the …
22nd September 2020
Recovery stalls in the middle of Q3 The batch of Polish activity data for August show that the pace of the recovery slowed as pent-up demand following the loosening of lockdown measures eased. The recovery will probably continue over the coming months, …
21st September 2020
Mining sector provides a helping hand The batch of Russian activity data for August show that the economic recovery continued throughout the middle of Q3 as mining output recovered strongly, but activity in the retail and manufacturing sectors lost …
18th September 2020
Drop in lira unlikely to prompt outright rate hikes The Turkish lira has come under additional pressure this week as the risk of EU sanctions has continued to rise. The central bank has tightened monetary conditions further, but an outright hike to policy …
The decision by Russia’s central bank to leave its policy rate on hold at 4.25% today is likely to mark a pause rather than an end to its easing cycle. The central bank will maintain its cautious approach to policy over the coming months as inflation …
The Czech Republic has seen a renewed surge in virus cases in recent weeks and now has one of the worst outbreaks in Europe. While this poses a growing downside risk to the outlook, it has not changed our view that the Czech economic recovery is set to be …
14th September 2020
Activity rebounds strongly at the start of Q3 Turkish industrial production and retail sales posted a strong recovery in July as the continued easing of lockdown measures and rapid credit expansion boosted activity. The tightening of monetary conditions …
Russia’s services sector cushions the fall in Q2 GDP The production breakdown of Russian GDP for Q2 showed that the economy’s sectoral structure helped to cushion the fall in output from the pandemic. Rosstat revised its estimate for the fall in GDP from …
11th September 2020
The rebound in Russian consumer spending since April has been supported by a more active fiscal policy stance than we had expected. Although the pace of growth will soften, spending is likely to remain strong and there’s a growing chance that the economy …
10th September 2020
The Russian ruble looks set to lose further ground over the coming months as geopolitical tensions and the threat of international sanctions ratchet up. We expect the ruble to drift towards 80/$ by year end, before rebounding to 72/$ (previously 65/$) by …
8th September 2020
Inflation rises further, pace of easing cycle will slow Russian inflation rose to 3.6% y/y in August and we think that it will edge up a bit further over the coming months. This shouldn’t trouble the central bank too much, but the threat of sanctions and …
4th September 2020
Ruble vulnerable amid sanctions threat The ratcheting up in geopolitical tensions in Russia this week amid concerns about the use of a chemical nerve agent is a warning sign for the ruble and further falls are likely to lie in store over the coming …
Inflation holds steady, lira key to next move in monetary policy Turkish inflation was unchanged between July and August, at 11.8% y/y, but the lira rather than inflation is likely to determine the central bank’s next moves. If the lira’s recent stability …
3rd September 2020
New daily coronavirus cases have hit record highs across Central and Eastern Europe over the past month and authorities have responded by tightening restrictions at a local level. Health systems in Poland and the Czech Republic are well placed to deal …
2nd September 2020
The 11% q/q drop in GDP in Turkey in Q2 was smaller than we had expected and we now forecast the economy to slump by 3% this year (previously 5.8%). But the recovery over the coming quarters will be held back by weakness in the tourism sector as well as …
1st September 2020
