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Downturn has only just begun The widespread slump in March’s Economic Sentiment Indicators (ESIs) for Central and Eastern Europe suggest that regional GDP growth slowed from 3.2% y/y in Q4 to around 2% y/y in Q1. But, with the survey not adequately …
30th March 2020
CEE central banks expand their toolkit As the number of coronavirus cases has increased and the damage to the region’s economies has intensified, the policy response across Central and Eastern Europe (CEE) has become more aggressive. Central banks in …
27th March 2020
The Czech central bank followed up last week’s emergency interest rate cut with further easing today and opened the door to use other measures to support the economy and stabilise the financial system. With the economic damage from the coronavirus …
26th March 2020
Hungary’s central bank announced a range of measures to increase liquidity in the banking system at today’s MPC meeting. But the economic effects of the coronavirus are likely to be much more damaging than policymakers currently think, suggesting that …
24th March 2020
The slump in domestic and external demand as a result of the coronavirus outbreak means that we now expect the Russian economy to contract sharply this year. Despite its recent reluctance we expect the central bank to cut interest rates before long and …
Countries across Emerging Europe have stepped up their efforts to contain the coronavirus outbreak over the past week or so and the economic damage will now be much more severe than we had previously thought. Output will decline sharply in Q2 and, even if …
23rd March 2020
Outlook goes from bad to worse The downside risks to the global economy have now become reality and the effects of the coronavirus will cause output to fall sharply in Q2 and GDP across the region will contract this year. The number of coronavirus cases …
20th March 2020
The Russian central bank’s decision to keep the policy rate unchanged at 6.00% today made it one of the few major central banks that has yet to cut rates to support the economy in response to the coronavirus. The central bank announced a series of …
The Turkish lira has held up relatively well amid the coronavirus-related sell-off in EM currencies, but the country’s large external debts leave it vulnerable if external financing conditions continue to tighten. A sharper sell-off in the currency would …
19th March 2020
The coronavirus outbreak has prompted interest rate cuts and fiscal support packages in several countries across Emerging Europe and we think that more easing lies in store. That said, Turkey’s easing cycle could grind to a halt and the sharp fall in the …
18th March 2020
The restrictive measures implemented by the authorities across Central and Eastern Europe to stem the spread of the coronavirus, as well as the spillover effects from the downturn elsewhere, will result in a sharp fall in regional GDP in Q2, of perhaps as …
Russia: oil collapse a headwind, but not disaster The outlook for Emerging Europe has taken a considerable turn for the worse over the past week. On the face of it at least, developments seem most adverse for Russia. The shift in oil policy in Saudi …
13th March 2020
The collapse in oil prices will reduce current high rates of inflation in Central Europe and provide some respite for those oil importers with more fragile external positions (Turkey, Romania and Ukraine). However, it will do little to cushion the blow to …
12th March 2020
The recent fall in the ruble will help to cushion the hit to the Russian government’s revenues resulting from the plunge in oil prices, but it will come at a cost to corporates that have large external debt burdens. The ruble slumped by 8% against the …
10th March 2020
The tailspin in global oil prices will push Russia’s current account and budget balances into deficit but shouldn’t create severe strains in the economy. It would probably take a steeper fall in prices, to $25pb or lower, to put a brake on plans to raise …
9th March 2020
Policy support to be stepped up as virus spreads The coronavirus outbreak has prompted a policy response across much of the world, but policymakers in Emerging Europe have only gone as far as acknowledging the risks. We suspect that support will be …
6th March 2020
Falling inflation will prompt another rate cut The further fall in Russian inflation to 2.3% y/y in February leaves the door open for the central bank to continue its easing cycle this month. Although market expectations for easing have been pared back …
With the coronavirus outbreak spreading across Europe and its disruption to economic activity likely to mount, we think that the Polish central bank will ease policy this year. But the tone of the MPC’s post-meeting press conference today suggests that …
4th March 2020
The spread of coronavirus outside China and its possible economic effects has prompted us to revise down our GDP growth forecasts across the region by 0.2-0.5%-pts. The scope for monetary easing is limited, but we think that central banks in Poland and …
Inflation rises again, but rate cuts still in play (for now) The further increase in Turkish inflation in February probably won’t be enough to deter the central bank from easing monetary policy a little more in the next couple of months. But policymakers …
3rd March 2020
In light of the accelerating spread of the coronavirus – and the economic disruption that is likely to follow – we are pulling down our GDP growth forecasts for Q1 and Q2 of this year. Growth is likely to rebound over the second half of the year, but most …
2nd March 2020
Turkey’s recovery gathering pace, divergence across Central Europe The rise in Turkey’s manufacturing PMI to a two-year high in February provides further evidence that the economic recovery continued at a rapid pace at the start of 2020. Elsewhere, there …
Syria tensions hit Russian & Turkish markets Concerns about the coronavirus outbreak have hit global financial markets, but assets in Turkey and Russia have taken a further leg down due to tensions between the two arising from the conflict in Syria. An …
28th February 2020
Loose policy supports rapid growth, but imbalances building Turkey’s economy grew by a rapid 1.9% q/q in Q4 of last year and loose policy will keep it motoring along over the coming quarters. But there are increasing signs that strong growth is fuelling a …
Weakness in industry is spreading February’s batch of Economic Sentiment Indicators (ESIs) for Central and Eastern Europe provided yet more evidence that weakness in industry is spreading to domestically-focused sectors. There are no clear signs of a hit …
27th February 2020
Concerns about the outbreak of coronavirus have taken their toll on the region’s financial markets over the past month. While the direct trade exposure of Emerging Europe to China is limited and there have been few reported cases of the virus in the …
26th February 2020
The slightly more hawkish tone of the Hungarian central bank’s post-meeting statement supports our view that the central bank will deliver a 10bp hike in the overnight deposit rate next month. However, the MNB is a dovish institution and, with inflation …
25th February 2020
Hungary’s central bank will probably use Tuesday’s meeting to flag a shift towards tightening and we expect a small hike in the overnight deposit rate in March. But this is likely to be a symbolic gesture more than anything else. Monetary policy will stay …
24th February 2020
Turkish gov’t seeks more control over local banks The Turkish government’s plans to transfer the opposition party’s stake in a major bank to the Treasury adds to the evidence that it is trying to gain more leverage over the banking sector. But there are …
21st February 2020
Economy started 2020 in a low gear The batch of Polish activity data for January suggest that GDP growth was broadly steady at around 3.2% y/y at the start of the year. With headwinds to growth building, the risks to our 2020 GDP growth forecast of 3.0% …
Economic growth looks to have held steady at start of 2020 January’s batch of Russian activity data suggest that GDP growth was broadly steady at around 1.8% y/y. While some of the recent props to growth have started to fade, policy support is likely to …
20th February 2020
The Turkish central bank (CBRT) shrugged off rising inflation and lowered interest rates by another 50bp today, but the accompanying statement was a little more cautious and we think that the easing cycle is nearing an end. With inflation set to surprise …
19th February 2020
Inflation baring its fangs Inflation rose above the upper level of central banks’ targets in Central Europe in January for the first time in over seven years. Inflation jumped in Hungary (4.7%), Poland (4.3%) and the Czech Republic (3.6%), largely …
14th February 2020
Central Europe catches Germany’s cold The weak batch of Q4 GDP data for Central & Eastern Europe show that the downturn in Germany took a bigger toll on growth across the region. Prolonged weakness in the euro-zone and softer domestic demand mean that …
Economy posts strong performance in Q4 The stronger-than-expected Turkish activity data for December suggest that the economic recovery gathered steam in the final quarter of last year. Looser fiscal and monetary policy will keep the economy motoring …
13th February 2020
The Turkish authorities have kept a tight grip on the lira in recent weeks but we don’t think that this can continue for much longer and expect the currency to fall by 20% against the dollar by end-2020. The longer that policymakers intervene to prop up …
10th February 2020
Romania moves one step closer to snap elections Romania’s three-month old government collapsed this week following its defeat in a no confidence vote brought by the opposition. This increases the chance of early elections this year, bringing forward …
7th February 2020
The Russian central bank governor’s post-meeting press conference reinforced the message that, following today’s 25bp interest rate cut to 6.00%, further easing lies in store. We maintain our view that there will be another 50bp of rate cuts in the …
The statement and press conference following today’s Czech MPC meeting confirmed that the surprise decision to hike interest rates by 25bp, to 2.25%, will be a one-off. Policymakers will probably maintain a hawkish tone over the next few months but, as …
6th February 2020
Drop in inflation to prompt rate cut tomorrow The larger-than-expected drop in Russian inflation to just 2.4% y/y in January primarily reflected the unwinding impact of last year’s VAT hike. But it will probably be enough to prompt the central bank to cut …
The investment booms that provided a key support to Central and Eastern Europe probably peaked last year. This is one reason why we think that regional GDP growth will slow in 2020-21. Investment booms tend to follow similar cycles across Central and …
5th February 2020
Evidence of recovery in late 2019 The Russian full-year GDP growth figure of 1.3% in 2019 was well below 2018’s outturn of 2.5%, but the figures suggest that growth accelerated a little further in the final quarter of last year, to 1.8% y/y. The breakdown …
3rd February 2020
Weakness in Central Europe, but Turkey’s recovery gathering pace January’s manufacturing PMIs for Central Europe remain consistent with a further slowdown in industrial sectors over the coming months. Elsewhere, the jump in Turkey’s PMI to a 22-month high …
Rising inflation won’t deter CBRT from further rate cuts The rise in Turkish inflation in January is unlikely to sway the central bank (CBRT) away from another interest rate cut this month as policymakers cave into pressure from President Erdogan. But …
CBRT’s output gap assumptions seem implausible In its Inflation Report released this week, Turkey’s central bank (CBRT) stuck to its forecast for inflation to fall back in 2020-21, but this rests on the farfetched assumption that a negative output gap …
31st January 2020
Sentiment slumps at the start of 2020 January’s batch of Economic Sentiment Indicators (ESIs) for Central and Eastern Europe point to regional GDP growth slowing to a fresh three-year low of 3.2% y/y in Q1. With signs that weak external demand is …
30th January 2020
Regional GDP growth in Emerging Europe appears to have picked up from 2.2% y/y in Q3 to around 2.5% y/y in Q4. This was predominantly driven by a recovery in Turkey’s economy, where policymakers are pulling out all the stops to support activity. Russia …
29th January 2020
President Putin’s plans to amend Russia’s constitution so that he can wield power beyond 2024 have fired up the Moscow rumour mill. But from an economic perspective, the much more important development has been the accompanying shift in the government’s …
Investment dragged down growth last year The weaker-than-expected 2019 Polish GDP growth figure of 4.0% suggests that the economy slowed sharply in the final quarter of last year. Softer activity reinforces our view that the MPC will look through the …
Economy loses momentum at the end of Q4 December’s batch of Russian activity data suggests that GDP growth in Q4 was broadly unchanged from Q3’s 1.7% y/y, but the economy appears to have lost steam at the end of the quarter. That strengthens the case for …
28th January 2020
