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The further fall in Russian inflation to 5.1% y/y last month probably seals the deal on an interest rate cut at next week’s meeting. We expect a 25bp cut to 7.50%. … Russia CPI …
6th June 2019
Weak export growth has caused Hungary’s current account balance to swing from a large surplus in 2016 to a small deficit, which is set to widen further. One consequence is that the forint is likely to depreciate against the euro over the next few years. … …
4th June 2019
May’s manufacturing PMI data supports our view that growth in Central Europe will slow over the rest of this year. The recent tightening of financial conditions in Turkey appears to be weighing more heavily on activity, reinforcing our view that the …
3rd June 2019
The weaker-than-expected Turkish inflation figures for May, combined with the recent rally in the lira, means that the MPC will continue to shift away from its hawkish stance at this month’s policy meeting. But with a number of flashpoints on the horizon …
The fiscal stimulus package unveiled in Hungary this week adds to reasons to think that the economy will grow more quickly than most anticipate over the course of this year. Meanwhile, positive meetings with the IMF have increased Ukraine’s chances of …
31st May 2019
The full breakdown of Q1 GDP data for the economies of Central Europe confirmed that domestic demand remains the main driver of growth, although there was a surprisingly large boost from net trade in a few economies. But a fading of the investment boom …
Turkey’s economy returned to growth in Q1 but the tightening of financial conditions over the past couple of months has probably resulted in a renewed downturn. This reinforces our view that the recovery will be slow and bumpy and we remain comfortable …
A recent improvement in the survey data from Russia suggests that, following an extremely disappointing Q1, the economy should undergo a modest recovery over the next few quarters. … Russian survey data point to small pick-up in …
30th May 2019
Emerging Europe has been one of the few parts of the emerging world where attention has centred on monetary tightening (rather than loosening) in the past month. A rise in core inflation to multi-year highs has prompted talk of rate hikes in Poland, …
29th May 2019
May’s set of ESIs suggests that aggregate GDP growth in Central and Eastern Europe slowed to 3.5% y/y in Q2 following impressively strong growth of 4.3% y/y in Q1. … Economic Sentiment Indicators …
28th May 2019
April’s activity data suggest that Russian GDP growth picked up at the start of Q2 as strong industrialoutput offset continued weakness in the retail and construction sectors. … Russia Activity Data …
24th May 2019
Steps taken this week by Turkish officials to shore up the lira could be the first move towards the imposition of capital controls, but if anything these are likely to store up larger falls in the currency. Elsewhere, comments this week from the Russian …
April’s strong batch of activity data suggests that, following an already-impressive Q1, Poland’s economy accelerated at the start of Q2. Our GDP Tracker points to growth of 5.3% y/y in April. … Poland Activity Data …
23rd May 2019
Fiscal policy exerted a big drag on the Russian economy last year and in Q1 of this year, but there are signs that the fiscal stance is now becoming less restrictive. This should support a modest recovery in GDP growth over the next few quarters. … …
22nd May 2019
The much weaker-than-anticipated Russian Q1 GDP growth figure of 0.5% y/y is consistent with a q/q contraction in output. We think that this probably marks the trough and growth should pick up over the next few quarters. Even so, the latest data are …
17th May 2019
An impressive batch of GDP data from Central and Eastern Europe, released this week, added to the evidence that strong domestic demand is offsetting external weakness. Elsewhere, Turkey’s budget deficit widened further in April, raising concerns that …
Another strong batch of GDP data for Central and Eastern Europe suggests that strong domestic demand continued to offset weak external demand in Q1. We expect that growth will remain robust over the coming quarters, but this will result in a continued …
15th May 2019
The much better-than-expected 2.1% rise in Turkish industrial production in March adds to signs that the economy grew in Q1, by around 0.5-0.8% q/q. But the recent tightening of financial conditions means that economy could contract again in Q2, …
14th May 2019
The Turkish central bank (CBRT) seems to have become more inclined to use its foreign exchange reserves to support the lira, despite growing scrutiny about the level of reserves. Growing question marks about reserve coverage are likely to damage the …
13th May 2019
The raft of Q1 GDP data due next week are likely to show that aggregate growth in Emerging Europe slowed to its weakest pace in over two years. Much of this reflects weakness in Russia; growth in Central Europe held up better thanks to the strength of …
10th May 2019
The recent pick-up in Hungarian core inflation is partly a result of tax changes but also reflects rapid wage growth, and this is likely to cause underlying price pressures to continue to build. We think that this will result in additional monetary …
9th May 2019
The small fall in Russian inflation to 5.2% y/y last month will provide reassurance to the central bank that inflation has now passed its peak. We expect the headline rate to ease further in the coming months and we think that policymakers will cut …
7th May 2019
The decision to cancel and re-run the Istanbul mayoral election is likely to prompt the Turkish government to continue loosening fiscal policy in the coming weeks. Past experience suggests that the stimulus won’t be withdrawn even after the election, …
The Turkish central bank’s messaging to investors has become even more confused over the past week and the institution’s damaged credibility means that it will be even more difficult for policymakers to make the case for interest rate cuts in the future. …
3rd May 2019
The weaker-than-expected Turkish inflation data for April will come as some relief to the central bank. But with a number of downside risks facing the lira, policymaker’s recent dovish shift feels premature and the scope for interest rate cuts this year …
The interest rate hike at today’s monetary policy meeting probably marks the end of the Czech National Bank’s tightening cycle. While we think that the currency will fail to appreciate by as much as the central bank anticipates, weakness in the euro-zone …
2nd May 2019
April’s PMI data point to a sharp slowdown in industrial output in Central Europe in the coming months. The weakness in the euro-zone looks set to take a heavier toll on Czech industrial output. Elsewhere, the recent tightening of financial conditions in …
Following several quarters of weakness, Russian wage growth will probably pick up a little over the coming months as public sector salaries are raised and labour market conditions continue to tighten. This should mean that GDP growth holds up better than …
1st May 2019
The National Bank of Romania’s decision to maintain strict control over money market liquidity marks a step in the right direction to addressing the large build-up of economic imbalances. But we think that these vulnerabilities will persist, prompting the …
The rise in Polish inflation to an 18-month high of 2.2% y/y in April was driven almost entirely by a pickup in food and fuel inflation. It appears that core inflation remained weak (at 1.5% y/y), which won’t be enough to prompt the dovish MPC to shift …
30th April 2019
Aggregate GDP growth in Emerging Europe appears to have slowed from 1.9% y/y in Q4 to around 1.3% y/y in Q1. While we don’t anticipate much of a rebound in the coming quarters, it does at least appear that the slowdown in regional growth is bottoming out. …
29th April 2019
April’s set of ESIs suggest that aggregate GDP growth in Central and Eastern Europe slowed from 4.0% y/y in Q1 to around 3.5% y/y at the start of Q2. It appears that the weak external environment is weighing more heavily on export-led industrial sectors …
The Turkish central bank’s dovish shift yesterday spooked investors and, with a number of flashpoints ahead for the lira, we think that it’s too soon for policymakers to be signalling interest rate cuts. Elsewhere, recent comments from several members of …
26th April 2019
The dovish nature of the Russian central bank’s post-meeting statement has prompted us to bring forward the interest rate cut that we had pencilled in for Q3 to June. Further ahead, we forecast that the benchmark one-week repo rate will be lowered from …
The Turkish central bank’s decision to leave interest rates on hold at today’s meeting was widely expected, although changes to the accompanying statement suggest that the MPC is starting to consider easing policy. We think that the scope for interest …
25th April 2019
Regional GDP growth is set to slow to its weakest pace since 2015 this year and our forecasts for most countries are below consensus. Weakness in the euro-zone will weigh on the highly-open economies of Central Europe, while growth in Russia is likely to …
24th April 2019
The Russian ruble has been the best-performing EM currency so far this year, in spite of the threat of tighter US sanctions which caused a premium to open up in February. We think that the ruble rally will reverse over the coming quarters as oil prices …
Polish inflation is likely to rise over the coming quarters, but we don’t think that will prompt a policy response. With growth set to slow next year and the ECB likely to relaunch QE, we expect that the Polish MPC will keep interest rates unchanged right …
23rd April 2019
March’s stronger-than-expected activity data suggest that Poland’s economy has, so far at least, shrugged off weakness in Germany. We estimate that GDP growth came in at around 4.5% y/y in Q1 – only a touch weaker than in Q4. … Poland Activity Data …
March’s activity data suggest that Russian GDP growth slowed markedly at the start of this year, weakening from 2.8% y/y in Q4 to 1.0-1.5% y/y in Q1. The pace of expansion is likely to remain soft over the coming quarters, although the consensus view on …
18th April 2019
Plans outlined by Poland’s government this week confirmed that fiscal policy will be loosened significantly this year and that there will be more scope for stimulus in 2020 than we had previously envisaged. We still think, however, that policy will be …
The better-than-expected 1.3% m/m rise in Turkish industrial production in February provides further evidence that the economy pulled out of recession in Q1. But the recovery is likely to be slow. … Turkey Industrial Production …
16th April 2019
The Turkish finance minister’s economic reform plan unveiled this week was light on details and provided worrying signs that the government may lean on state banks to drive an economic recovery. Elsewhere, the rise in inflation across Central Europe in …
12th April 2019
The rise in Czech inflation to a six-year high of 3.0% y/y in March was driven primarily by a pick-up in food inflation and probably is not enough to convince the central bank to hike rates next month. … Czech CPI …
10th April 2019
The small rise in Russian inflation, to 5.3% y/y last month, should help to reassure the central bank that January’s VAT hike hasn’t translated into a marked strengthening of price pressures. Inflation has now probably peaked and should decline in the …
5th April 2019
The Turkish lira has been fairly steady following last Sunday’s local elections, but there are a number of potential flashpoints that could cause it to come under pressure again in the coming weeks. Elsewhere, strong February retail sales data from …
In the event of a no-deal Brexit, we think that weaker UK import demand would probably result in Central European GDP growth in 2019-20 being 0.3-0.5%-pts weaker than in a managed Brexit scenario. Meanwhile, the financial market fallout would probably be …
3rd April 2019
Turkish inflation was stable at 19.7% y/y in March and, while we expect it to resume its downward trend in the coming months, in the near-term at least monetary policy will remain tight to support the lira. … Turkey Consumer Prices …
The strength of Russian GDP growth in Q4 (and the upwards revisions to the historical data) has caused controversy. But overall, we think the new GDP figures probably bear a closer resemblance to actual economic conditions. More importantly, the pick-up …
1st April 2019
Another weak batch of PMI data from Central Europe points to a contraction in the region’s manufacturing sector over the coming months. More encouragingly, a rebound in Russia’s survey supports our view that the recent recovery in the country’s industrial …
