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Manufacturing sectors continue to bounce back The batch of manufacturing PMIs across Emerging Europe for August provided further signs that the economic rebound continued in Q3. Industrial sectors are likely to recover further over the coming months, …
1st September 2020
Turkish lira still vulnerable as EU tensions escalate The Turkish central bank’s tightening of monetary conditions has helped to stabilise the lira but the further ratcheting up of tensions with the EU mean that the risks to the currency lie to the …
28th August 2020
Sentiment improves further in Q3 The further increase in the EC’s Economic Sentiment Indicators for August echoes the message from other surveys and high-frequency data that the recovery gained pace in Q3. But sentiment remains far below pre-crisis levels …
Political instability in Belarus has prompted speculation about how President Putin will respond to calm the situation. Mr. Putin is working to maintain close ties with Belarus, but the more that the political situation deteriorates, the more likely that …
27th August 2020
The neutral interest rate has become one of the hot topics in Russian monetary policy over the past year and the downward revision to the central bank’s estimate of the neutral rate in July marks the first step in the shift towards a new normal of lower …
26th August 2020
Reasons for caution about Turkey’s gas discovery Turkey’s discovery of gas in the Black Sea will provide some boost to the country’s external position, but it might be quickly eroded. President Erdogan unveiled the discovery on Friday of a field …
21st August 2020
Activity recovering quickly to pre-pandemic levels July’s batch of Polish activity data provides further evidence that industrial production and retail sales have rebounded quickly towards pre-virus levels. The rise in localised virus cases does not yet …
Economy gaining momentum at the start of Q3 The batch of Russian activity data for July suggest that the economy gained a bit of momentum at the start of Q3 following the 8.5% y/y fall in GDP in Q2 as retail sales continued to rebound. But the overall …
20th August 2020
Turkey’s central bank kept its key policy interest rates on hold today and, while the accompanying statement acknowledged growing upside risks to inflation, it looks like that the focus will remain on tightening monetary conditions via the use of the …
The escalation of protests in Belarus and calls for EU sanctions pose a major threat to political stability in the country and the economic outlook, but a downturn in Belarus’ economy would have limited fallout for other countries. The key question is how …
17th August 2020
CBRT does enough, for now Turkey’s central bank has acted swiftly over the past week to tighten monetary conditions and comments from officials suggest that the authorities are shifting away from directly intervening to defend the lira. The lira’s recent …
14th August 2020
A mixed bag across the region with Poland the star performer The Q2 GDP data for Central and Eastern Europe confirmed that the region’s industry-heavy economies suffered the largest hit in the crisis, while Poland and Bulgaria managed to escape …
Turkey suffers one of world’s largest slumps in Q2 Turkish industrial production and retail sales continued to rebound strongly in June but even so it looks like the slump in GDP over Q2 as a whole is likely to have been in the region of 20% q/q or so – …
Turkey’s banks are more vulnerable now to a sell-off in the lira and a tightening of external financing conditions than they were in the run-up to the 2018 currency crisis. The Turkish lira has stabilised after the central bank took steps to tighten …
12th August 2020
Sharp fall in output, weak recovery to follow The smaller-than-expected fall in Russian GDP of 8.5% y/y in Q2 confirms that the downturn in Russia’s economy wasn’t as bad as had been feared as the crisis unfolded earlier this year. The early signs are …
11th August 2020
Turkey’s central bank (CBRT) has burned through its FX reserves to defend the lira this year, but the CBRT’s firepower is severely depleted and reserves are now so dangerously low that monetary conditions will need to be tightened by much more to prevent …
If strains in Turkey’s balance of payments fail to ease, the central bank will probably tighten monetary conditions more aggressively within the interest rate “corridor”. But use of the corridor alone would not allow real interest rates to return to …
10th August 2020
CBRT unlikely to satisfy markets The sharp fall in the Turkish lira this week appears to be pushing the central bank (CBRT) towards monetary tightening. But we’re not convinced that it will do enough to placate financial markets. Towards the end of July …
7th August 2020
Inflation ticks up but further rate cuts on the cards The rise in Russian inflation to 3.4% y/y in July is likely to be followed by a further modest increase over the next few months, but this shouldn’t prevent the central bank from cutting the policy …
6th August 2020
Turkey’s current account deficit has widened to levels not seen since 2018, which can partly be explained by a slump in tourism receipts. While this should start to reverse over the rest of this year, Turkey’s large external financing needs will keep the …
Drop in inflation unlikely to prompt fresh rate cuts Turkish inflation eased by more than expected in July, to 11.8% y/y, but this is unlikely to prompt the central bank to restart its easing cycle. Indeed, with pressure on the lira building, the next …
4th August 2020
Central Europe leads the recovery, Russia stuttering The further rise in the manufacturing PMIs across Central Europe in July is an encouraging sign that the economic recovery continued at the start of Q3. But the fall in Russia’s PMI last month adds to …
3rd August 2020
Czech economy one of Europe’s most resilient in Q2 Preliminary Q2 GDP figures released by the Czech Republic on Friday support our view that Central Europe will recover more quickly from the coronavirus crisis than most other EM regions. The Czech economy …
31st July 2020
Turkish financial markets have come under renewed pressure this month, underlining the risks posed by the country’s low level of foreign exchange reserves and large external financing needs. The threat of EU sanctions seems to have been the proximate …
30th July 2020
Sentiment improves further, but services lag behind The further rise in the Economic Sentiment Indicators in July adds to the evidence that the economies of Central and Eastern Europe are steadily recovering from the sharp downturn in Q2. That said, …
Today’s depreciation of the Turkish lira marks the first significant departure from the de facto peg that has been in place over the past month and, if tensions with the EU continue to escalate, sharper falls lie in store. These could ultimately force the …
28th July 2020
EU fund proposals a major benefit for CEE This week’s agreement on the EU budget is generally a positive outcome for Central and Eastern Europe. There are two important parts of the EU budget. First, a €750bn Recovery Fund has been agreed in which the EU …
24th July 2020
Russia’s central bank cut its policy rate by 25bp, to 4.25%, today and continued to provide signals that further easing lies in store. But the communications suggest that the pace of easing will slow. We maintain our forecast for the policy rate to be …
Turkey’s central bank kept interest rates on hold today and it’s clear from the accompanying statement that inflation concerns are preventing further easing. We think that rates will now be left on hold for the next couple of years. But given high rates …
23rd July 2020
Overview – The economies of Emerging Europe are set to bounce back more strongly from the coronavirus crisis than those in many other parts of the world. Central Europe will lead the recovery. Governments have had success in slowing the spread of the …
22nd July 2020
V-shaped recovery after all? The rebound in Polish industrial production and retail sales in June suggests that the contraction in GDP in Q2 may be in the order of 4% y/y, much smaller than the 8-9% y/y we had expected. Activity in other parts of the …
21st July 2020
Russia’s national projects kicked into the long grass The postponement of President Putin’s flagship National Projects initiative seems to pave the way for the Prime Minister’s economic recovery plan to take centre stage over the coming years. But it also …
17th July 2020
Russia’s central bank has lowered its policy rate to a post-Soviet low during the current crisis and, with the economy likely to recover slowly and inflation set to remain subdued, further monetary easing lies in store. We expect the policy rate to be …
16th July 2020
Economy starts to recover Turkish activity data for May show that industrial production and retail sales recovered from their low point in April but it still looks like Turkey suffered one of the largest contractions in Q2 across major EMs. The economic …
13th July 2020
The rebound in retail sales and industrial production across Central and Eastern Europe in May supports our view that the region will experience a relatively strong recovery in the second half of this year. Data released this week provided further …
10th July 2020
Turkey’s credit boom that started towards the end of last year has been turbocharged in recent months and this should provide some welcome support to the economy as it emerges from the coronavirus crisis. That said, the nature of the lending reinforces …
9th July 2020
Rising inflation should not prevent further easing Russian inflation rose to 3.2% y/y in June and we think that it will rise a bit further over the coming months. But this increase should prove temporary and inflation is likely to remain below the central …
8th July 2020
Borders are slowly re-opening across Emerging Europe, but international tourists are unlikely to return to the region in significant numbers for the key summer season. Romania and Russia are the least vulnerable and efforts to promote domestic tourism …
7th July 2020
NBU governor departure raises IMF deal fears This week’s resignation of Ukraine’s central bank (NBU) governor is, by itself, unlikely to upend the country’s IMF deal but failure to replace him with a credible candidate or backsliding on recent key pieces …
3rd July 2020
Inflation jump reinforces idea that easing cycle is over The jump in Turkish inflation in June, to 12.6% y/y, as well as last week’s surprise decision by the central bank to leave interest rates unchanged, reinforces our view that the easing cycle is …
Poland’s central bank appears to have become concerned about the strength of the zloty recently and the negative impact this could have on the pace of the economic recovery, suggesting that it is likely do more to loosen policy this year. We think that …
2nd July 2020
Manufacturing sectors rebound strongly at the end of Q2 The rise in the manufacturing PMIs in June provide further signs that economic output recovered strongly at the end of Q2 as lockdown measures were lifted. While we would caution that the PMIs may …
1st July 2020
It is by no means inevitable that the coronavirus crisis puts a big permanent hole in the supply capacity of economies (i.e. their ability to produce goods and services). With the right government policies, many economies should be able more or less to …
29th June 2020
Sentiment picks up further in June The broad-based rise in June’s Economic Sentiment Indicators provide further signs that the economies of Central and Eastern Europe started to get back on their feet at the end of Q2. That said, the rebound in sentiment …
Putin seeks to consolidate power with referendum Russians began voting this week on amendments to the constitution which would give President Putin the opportunity to rule unfettered until 2036. The government has sweetened the deal with fiscal …
26th June 2020
Turkey’s central bank unexpectedly left interest rates on hold today and it’s difficult to see how economic conditions will change in such a way over the coming months to justify renewed easing. We now expect rates to be left on hold over the rest of this …
25th June 2020
Lockdown measures dealt a heavy blow to economies across the region in April, but the latest data offer encouraging signs that activity has recovered quickly over the past couple of months. Economic activity in the first few weeks of June was at or above …
23rd June 2020
Hungary’s central bank (MNB) unexpectedly cut its base rate from 0.90% to 0.75% at today’s monetary policy meeting, and we now think another cut is likely in the second half of this year. With the economic recovery likely to fall short of the central …
Activity bounces back strongly Polish activity data for May show that activity in the retail sector bounced back more quickly than in the industrial sector as lockdown measures were lifted. Even so, the figures support our relatively optimistic view that …
22nd June 2020
Poland’s central bank likely to consider other tools Comments from Poland’s central bank (NBP) this week highlighting the risk that a stronger zloty would hold back the economic recovery suggests that the NBP may pursue a more aggressive monetary stance. …
19th June 2020
