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The forecasts accompanying today’s Czech monetary policy meeting imply that the CNB’s tightening cycle is now finished. Following seven interest hikes, we agree that the bulk of tightening has already happened, but we think that there is still scope for …
1st November 2018
The continued weakness of Turkey’s PMI provides further evidence that the economy has fallen into a deep recession. Elsewhere, the drop in the Czech PMI last month suggests that softness in the country’s industrial sector in Q3 lingered on into Q4. But …
Growth in most of Emerging Europe will continue to slow over the next couple of years, and by more than most expect. The slowdown is set to be sharpest in Turkey, where the recent currency crisis will result in a slump in domestic demand, pushing the …
31st October 2018
Our weighted average of the Economic Sentiment Indicators for Central and Eastern Europe (CEE) fell to an 11-month low in October, suggesting that GDP growth across the region continued to slow at the start of Q4. … Economic Sentiment Indicators …
30th October 2018
The Russian central bank’s statement accompanying today’s Board meeting reinforces our view that September’s interest rate hike was intended as a one-off. Whereas the financial markets are pricing in further tightening, we think it’s most likely that the …
26th October 2018
The worse-than-expected performance of the ruling PiS party in Poland’s local elections last weekend is likely to prompt policymakers in Warsaw to ramp up social spending ahead of next year’s parliamentary elections, cushioning the slowdown in GDP growth. …
After a strong Q2, growth in Emerging Europe as a whole slowed in Q3, from 3.5% y/y to around 2.8% y/y. In Russia and Poland, this slowdown has been relatively gradual and driven by weakness in manufacturing sectors. Turkey’s economy has, unsurprisingly, …
25th October 2018
The Turkish central bank’s decision to leave interest rates unchanged today and the accompanying statement reinforce our view that last month’s aggressive rate hike didn’t represent a shift back to orthodoxy. Interest rates are unlikely to be raised …
The announcement on Friday that Ukraine has come to an agreement with the IMF to replace its current bailout package should reduce risks posed by the government’s large upcoming FX debt repayments. But compliance will remain a major hurdle and problems …
22nd October 2018
The recent rallies in the Russian ruble and the Turkish lira have added weight to our view that central banks in both countries will refrain from tightening policy further when they meet next week. Meanwhile, data that slipped under the radar this week …
19th October 2018
Polish activity data for September were softer than expected and suggest that GDP growth weakened from 5.1% y/y in Q2 to 4.5% y/y in Q3. This slowdown is likely to continue over the next few quarters. … Poland Activity Data …
The softness of the Russian activity data for September means that overall GDP growth probably weakened to around 1.5% y/y in Q3 (from 1.9% y/y in Q2). That said, there are still reasons to think that the economy will strengthen in the coming months. … …
17th October 2018
Turkish industrial production held up better-than-expected in August but there are clear signs that underlying growth in the sector is losing momentum. The effects of the recent currency crisis and dramatic tightening of financial conditions will continue …
16th October 2018
September’s strong Hungarian inflation data – released on Tuesday – caused investors to raise their interest rate expectations, coming round to our more hawkish view. Meanwhile, a fall in inflation last month didn’t prevent policymakers at the Czech …
12th October 2018
Turkey’s current account position improved further in August adding to the evidence that a weaker lira is helping the economy to rebalance. But this adjustment has almost entirely reflect a slump in imports, a sign that domestic demand has been hit hard. …
11th October 2018
The Turkish government’s latest plan to tackle high and rising inflation will probably have a limited impact and it reinforces our view that last month’s aggressive interest rate hike did not herald a broader shift back to orthodox policymaking. … Turkey: …
10th October 2018
The Romanian central bank’s FX intervention this year has kept the leu artificially strong, causing economic imbalances to build. Unless policymakers change course soon and loosen their grip on the currency, a messy economic adjustment lies in store. … …
We think that the unexpected drop in Czech inflation last month, to 2.3% y/y, will persuade the MPC to pause its tightening cycle at next month’s meeting. Elsewhere, a further rise in inflation in Hungary supports our view that policymakers will rein in …
9th October 2018
The further rise in Russian inflation, to 3.4% y/y, last month was driven mainly by a pick-up in food inflation, but core price pressures stayed soft. That, coming alongside the recent stabilisation of the ruble and fall in inflation expectations, …
5th October 2018
The sharp rise in Russian oil output in September, and talk this week of further increases, suggests that the recovery in Russia’s economy has further to run. The Turkish lira has come under pressure over the past few days and the sell-off could deepen …
Poland’s MPC maintained a dovish stance today. On the face of it, low inflation suggests that this position is justified, but we think that policymakers are too sanguine on the outlook for consumer prices. Inflation is likely to rise by more than the MPC …
3rd October 2018
The larger-than-expected rise in Turkish inflation to 24.5% y/y in September increases the chances of another interest rate hike at this month’s MPC meeting. But given the scale of last month’s rate hike and continued bellicose comments from President …
Russia’s recovery doesn’t appear to have used up the spare capacity in the economy and we estimate that there is an output gap of about 1% of potential GDP. That means there’s scope for GDP to grow faster than potential over the next few quarters. …
2nd October 2018
The sharp drop in Turkey’s PMI last month chimes with other very weak survey data and adds to the evidence that the economy has entered a deep recession. Elsewhere, big falls in the PMIs from Central Europe support our view that GDP growth will continue …
1st October 2018
Turkish financial markets rallied this week amid signs of improving foreign relations and easing strains in the banking sector, but the latest data releases add to the evidence that the economy is entering a severe recession. Meanwhile, the continued …
28th September 2018
Our weighted average of the Economic Sentiment Indicators for Central and Eastern Europe (CEE) fell to a ten-month low in September, suggesting that GDP growth in the region has continued to slow in Q3. … Economic Sentiment Indicators …
27th September 2018
The ECB’s loose monetary stance isn’t compatible with Slovakia’s advanced stage of the business cycle and it looks like the government will respond by tightening fiscal policy to prevent the economy from overheating. This, coupled with household …
26th September 2018
Central banks in Emerging Europe shifted into tightening mode this month as policymakers in Turkey, Russia and Ukraine hiked interest rates in response to pressure on their currencies. The Czech MPC is likely to raise rates later this month, although in …
24th September 2018
The New Economy Program presented by Turkey’s finance minister on Thursday included more realistic economic forecasts, but it failed to build on the central bank’s interest rate hike last week and indicate a broader improvement in domestic policymaking. …
21st September 2018
Polish activity data for August were strong and suggest that the economy has continued to expand at a rapid 5% y/y in Q3. The risks to our 2018 GDP growth forecast of 4.3% lie to the upside. … Poland Activity Data …
Last week’s aggressive interest rate hike in Turkey has reduced the risk of a more acute balance of payments crisis and helped to restore some of the central bank’s (CBRT) damaged credibility. But the CBRT would need to shrug off pressure from President …
19th September 2018
The batch of Russian activity figures for August showed a slump in the agricultural sector, which is likely to cause GDP growth to weaken in Q3. The experience from the past decade is that these slumps in agriculture tend to pass within a few months. And …
The National Bank of Hungary’s revamp of its monetary policy framework announced today was characteristically complex. But the key point is that the Bank is paving the way for policy tightening and we expect interbank interest rates to increase over the …
18th September 2018
The much stronger-than-expected Turkish industrial production for July suggest that the boost to competitiveness from the fall in the lira in May and June has supported the sector. But these predate the acute phase of the sell-off and the dramatic …
17th September 2018
The aggressive interest rate hike in Turkey on Thursday has soothed the markets, but President Erdogan’s comments today reinforce our fears that he will put pressure on the central bank to reverse course. Meanwhile, comments from the Czech National Bank …
14th September 2018
The tone of the Russian central bank’s press conference suggests that today’s interest rate hike was a pre-emptive move against an expected tightening of US sanctions, not the start of a cycle. As things stand, we think it’s most likely that rates will be …
The aggressive interest rate hike delivered by Turkey’s central bank has soothed the markets, but the next thing to watch will be the reaction of President Erdogan. Any sign that he will try to reassert his influence over monetary policy decisions could …
13th September 2018
Polish inflation is lower, and has been slower to rise, than elsewhere in Central & Eastern Europe (CEE), which seems to be a result of having more slack in its labour market and faster productivity growth. Nonetheless, we think inflation is likely to …
The Turkish economy grew at a strong pace of 5.2% y/y in Q2 but the monthly activity data show that there was a loss of momentum towards the end of the quarter. More timely figures point to a steep recession at the start of Q3. … Turkey GDP (Q2 …
10th September 2018
Central banks in both Russia and Turkey created a stir this week by raising the prospect of rate hikes, but we think that the degree of tightening in Turkey will disappoint markets and policymakers in Russia will probably leave interest rates unchanged. …
7th September 2018
Turkey’s central bank has all but confirmed that it will raise interest rates at next week’s MPC meeting and an increase of 350-400bp seems to be the bare minimum that will be needed to soothe investors. But pressure from the government means we think …
6th September 2018
The rise in Russian inflation to 3.1% y/y in August, combined with Governor Nabiullina’s hawkish comments yesterday, will add fuel to expectations for an interest rate hike. But with underlying price pressures still extremely weak, we think that the …
5th September 2018
Turkish inflation jumped again in August, reaching 17.9% y/y, and it is likely to rise even further over the coming months. The central bank has just stated that the inflation figures will prompt a change to the monetary stance at September’s MPC meeting, …
3rd September 2018
Turkish CPI figures due on Monday are likely to show that inflation rose to its highest level since 2003, but government pressure means that this is unlikely to prompt the central bank to hike interest rates. Elsewhere, the Ukrainian hryvnia has come …
31st August 2018
The fresh sharp falls in the Turkish lira this week reflect growing concerns about the state of domestic policymaking and the health of the banking sector. Monetary tightening or an improvement in relations with the US could support a relief rally. For …
30th August 2018
Our weighted-average of the Economic Sentiment Indicators for Central and Eastern Europe (CEE) fell in August, adding to the evidence that GDP growth across the region has continued to weaken. … Economic Sentiment Indicators …
Russian President Vladimir Putin’s announcement yesterday that the government will soften a planned rise in the retirement age wasn’t altogether surprising, but it marks part of a broader slippage on recent fiscal reforms – including the new fiscal rule. …
The latest Turkish activity data suggest that the plunge in the lira since May, and the associated sharp tightening of financial conditions, has tipped the economy into recession. Things are only likely to get worse and our GDP growth forecasts lie well …
29th August 2018
The Russian ruble came under pressure this week as investors worried that US sanctions will be ramped up. For now, though, we don’t think that this will have a significant near-term impact on the economy. Elsewhere, the dovish stance taken by Hungary’s …
24th August 2018
Turkey plunged into a full-blown currency crisis this month following the imposition of US sanctions and an absence of (or refusal to pursue) an orthodox policy response. Inflation, which was already at a 15-year high, is likely to rise further, and the …
