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Industry’s outperformance coming to an end June’s terrible industrial production data for Central Europe provided the first clear sign that weakness in the euro-zone is dragging manufacturing activity in the region down. After rising strongly for most of …
9th August 2019
The recent pace of Russian household lending looks frothy, but the central bank already appears to have taken some of the steam out of the credit boom. Even if household loans start turning sour further down the line, the impact on the banking sector …
8th August 2019
Easing inflation strengthens the case for further rate cuts The decline in Russian inflation to 4.6% y/y last month – coming alongside the stability of the ruble this week – adds weight to our view that the central bank will cut its policy rate by a …
6th August 2019
The Turkish lira has held up remarkably well in the face of the escalation of the US-China trade war and the recent rise in global investor risk aversion. But with the threat of US sanctions lingering, concerns about Turkey’s external vulnerabilities …
Rise in inflation to be temporary, further large rate cuts still on the cards The rise in Turkish inflation in July is likely to be temporary and followed by chunky falls in the coming months. Accordingly, so long as the lira remains stable, the central …
5th August 2019
CBRT too sanguine on inflation risks The Turkish central bank’s optimistic inflation forecasts add weight to our view that it is likely to go too far with monetary easing and will ultimately have to reverse course further down the line. In its latest …
2nd August 2019
The communications following today’s meeting suggest that Czech policymakers are trying to temper the market’s view that interest rates will be cut in the coming months. Nonetheless, the Bank’s projections have moved closer to our view that rate cuts will …
1st August 2019
PMIs weaken further, hard data to follow suit soon July’s batch of manufacturing PMIs point to a sharp slowdown in industrial output across Central Europe at the start of Q3 . While the hard activity data have so far defied the weak messages painted by …
Holding up at the start of Q3 The European Commission’s Economic Sentiment Indicators for July suggest that growth across Central and Eastern Europe held steady at a decent 3.5% y/y or so at the start of Q3. Strength in consumer-facing sectors is, for …
30th July 2019
Turkish central bank playing with fire Turkish financial markets took Thursday’s larger-than-expected interest rate cut in their stride but we don’t think that this resilience will last. Investors seems to be coming round to our view that the central bank …
26th July 2019
The relatively dovish statement accompanying the Russian central bank’s decision to cut the policy rate today supports our view that the easing cycle has a lot further to go. We expect an additional 75bp of cuts over the next 9-12 months, whereas the …
A raft of survey data suggests that last month’s fall in Hungarian core inflation is unlikely to mark the start of a downward trend – as the central bank anticipates. We expect that underlying price pressures will build over the coming quarters, prompting …
The Turkish central bank’s new governor, Murat Uysal, delivered a sharp 425bp interest rate cut at today’s MPC meeting and pressure from President Erdogan means that further aggressive easing lies in store over the coming months. But this is likely to …
25th July 2019
Manufacturing surveys across Central Europe have overstated the weakness of industry recently, but the strength of production growth looks unsustainable. As prolonged weakness in the euro-zone takes an increasing toll on activity in the region, a slowdown …
24th July 2019
Russia ’s economy remained very soft in Q2, although it does at least seem to have dodged a technical recession – albeit by the skin of its teeth. Much of the weakness seems to be concentrated in the services sector, where slow household income growth and …
23rd July 2019
Erdogan: rates to be cut in a “serious manner” Comments this week from Turkey’s new central bank governor and President Erdogan suggest that an interest rate cut next Thursday will be followed by further aggressive easing in the coming months. The case …
19th July 2019
Growth loses momentum at the end of Q2 June’s weak batch of activity data came after two strong months and suggests that after growing by an impressive 4.7% y/y in Q1, the economy maintained a similar pace in Q2. The biggest disappointment was in the …
Economy continues to struggle in Q2 June’s activity data suggest that following a weak Q1, Russian GDP growth slowed in Q2. This, combined with soft inflationary pressures, supports our view that the central bank will cut rates next week. Russian monthly …
17th July 2019
An initial round of US sanctions on Turkey, if approved by President Trump, would probably generate some financial market turbulence and this could ultimately cause major strains on banks’ balance sheets. US officials have reportedly prepared a list of …
16th July 2019
A further sharp rise in EU structural fund inflows will support strong Polish fixed investment growth over the next couple of years. But that won’t be enough to prevent overall GDP growth from slowing. Since the start of 2018, fixed investment growth has …
Strong domestic demand means that Romania’s current account deficit, which is already among the largest of any major EM, is likely to widen further. This makes the leu increasingly vulnerable to a deterioration in investor sentiment and is likely to …
15th July 2019
Downside risks to Turkey’s outlook mount Developments in Turkey over the past week highlight that all levers of economic policy have effectively been centralised in the hands of one man – President Recep Tayyip Erdogan. The reaction in financial markets …
12th July 2019
Industry rebound suggests economy avoided contraction in Q2 The stronger-than-expected Turkish industrial production figures for May suggest that the economy may just have avoided a fresh fall in GDP in Q2. Nonetheless, we expect the economic recovery …
The Czech economy has underperformed its regional peers in recent years due to its larger exposure to the euro-zone and weaker household spending. However, the Czech slowdown is close to bottoming out. In contrast, slowdowns elsewhere in Central Europe …
10th July 2019
Overview – Regional GDP growth probably hit a trough in the first half of the year, but the recovery from here on will be sluggish. Turkey is only likely to pull out of its recent recession slowly, and growth in Russia will be held back by oil output …
9th July 2019
Further fall in inflation likely to prompt a rate cut this month The further fall in Russian inflation to 4.7% y/y last month, coming alongside recent dovish comments from the central bank, has prompted us to pencil in a 25bp rate cut (to 7.25%) at the …
8th July 2019
The dismissal of Turkey’s central bank governor over the weekend increases the chances of aggressive cuts in interest rates in the near-term. But it has also raised the risk of larger currency falls and is likely to make the country’s high inflation …
Oil sector drag won’t prevent Russian recovery The rollover of OPEC’s oil production quotas for nine more months will be an unhelpful headwind for Russia’s economy, but it is unlikely to prevent growth from picking up in the second half of 2019. Russian …
5th July 2019
The relatively dovish stance adopted by Poland’s MPC in the communications accompanying today’s interest rate meeting supports our view that monetary policy settings will be left unchanged until the end of the Council’s term in early-2022. The decision by …
3rd July 2019
Plunge in inflation brings rate cuts onto agenda, but all hinges on lira The sharp decline in Turkish inflation in June, to 15.7% y/y, increases the chances that the central bank will embark on an easing cycle at its policy meeting later this month. But …
A rise in inflation has led five of the ten Polish MPC members to suggest that interest rates may soon need to be raised. But we doubt that any of the five more dovish members, including Governor Glapinski (who has the deciding vote in the event of a …
2nd July 2019
Central Europe set for an industrial-sector slowdown June’s PMI data point to a marked slowdown in industrial output growth in Central Europe over the coming quarters. Elsewhere, Turkey’s latest PMI reading suggests that, following a disappointing Q2, …
1st July 2019
Turkey’s fiscal credibility under scrutiny Investors in Turkey will be nervously waiting to see if President Erdogan can persuade President Trump at the G20 to approve Turkey’s purchase of a Russian missile defence system, lifting the threat of sanctions …
28th June 2019
The direct economic impact of an initial round of US sanctions on Turkey related to the purchase of Russian defence equipment would probably be limited, but past experience suggests that the threat of further sanctions would weigh on the lira and cause …
27th June 2019
ESIs suggest CEE growth remained strong in Q2 June’s set of ESIs suggests that aggregate GDP growth in Central and Eastern Europe (CEE) remained at around 4% y/y in Q2. But over the coming quarters, problems in the euro-zone are likely to take a greater …
The Czech National Bank’s post-meeting communications offered the strongest hint yet that the monetary tightening cycle is over. With underlying inflationary pressures likely to ease and the global economy set to slow further, we think that easing will …
26th June 2019
Recent activity data suggest that recoveries in Emerging Europe’s two largest economies – Russia and Turkey – have been disappointing. In Russia, where the economy expanded by a meagre 0.5% y/y in Q1, growth hasn’t been much quicker in Q2. And after …
25th June 2019
We still think that further monetary tightening lies in store in Hungary over the next eighteen months. But dovish communications accompanying today’s monetary policy meeting, and the reluctance to hike interest rates in the face of rising inflation, …
The opposition candidate secured victory in the rerun of Istanbul’s mayoral election, but this is unlikely to result in a favourable shift in the direction of economic policymaking in Turkey as a whole. And major risks still lie ahead for the economy, …
24th June 2019
This weekend’s re-run of the Istanbul mayoral election will dominate the headlines in the coming days, but it looks like the result will do little to curtail the deterioration in Turkish economic policymaking. … Istanbul election won’t lead to turnaround …
21st June 2019
May’s activity data suggest that, following extremely weak GDP growth in Q1, Russia’s economy has failed to gather much momentum in Q2. … Russia Activity Data …
20th June 2019
Fiscal stimulus packages recently announced in Central and Eastern Europe won’t trouble public debt positions, but are coming at a late stage of economic cycles. As a result, they will cause macro imbalances to build and limit governments’ ammunition to …
18th June 2019
The weaker-than-expected Turkish industrial production data for April provide the first hard evidence that, after returning to growth in Q1, the economy contracted again in Q2. This supports our view that the recovery from recession will be slow and …
The Central Bank of Russia’s dovish communications accompanying today’s decision to cut the key rate support our view that more monetary loosening lies in store over the coming quarters. We expect that the one-week repo rate will be lowered to 6.75% by …
14th June 2019
Turkish assets look set to come under more pressure in the coming weeks as the government pushes ahead with its plans to purchase a Russian missile defence system. Meanwhile, comments from Russia’s Deputy Finance Minister this week, suggesting that …
Turkey’s banks came through last year’s currency crisis without suffering the severe problems that many had feared. But credit growth will probably stay weak, holding back the economic recovery. Moreover, banks’ reduced level of liquid FX assets, growing …
13th June 2019
The Turkish central bank provided further hints at today’s meeting that it is moving towards monetary easing. But policy moves will hinge on the lira and, with a number of flashpoints on the horizon, we think that the scope for rate cuts is limited. … …
12th June 2019
Polish industry has been surprisingly resilient this year, largely reflecting impressive demand from the domestic market. We still expect weak external demand to weigh more heavily on growth in the export-intensive manufacturing sectors this year, but …
11th June 2019
The rise in Russian inflation in late-2018 and early-2019 was driven largely by higher food prices and a VAT hike. To overcome these distortions, we’ve created a measure of ‘underlying’ inflation, which is currently in line with the central bank’s 4% …
10th June 2019
Protests in the Czech Republic this week calling for the resignation of Prime Minister Andrej Babiš have raised the chance of a government collapse. But even if political uncertainty builds, there is unlikely to be much impact on financial markets or the …
7th June 2019
