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The US sanctions imposed on Russia last Friday have caused turmoil in Russia’s markets today and financial conditions have tightened as a result. But at this stage it doesn’t look like there will be a significant impact on growth in the economy as a …
9th April 2018
Fidesz-KDNP’s sweeping victory in Sunday’s parliamentary election in Hungary has been welcomed by local financial markets, but the late stage of the economic cycle means the government’s next term is likely to be characterised by higher inflation and …
The recent drop in inflation across Central Europe has caught ourselves and most other analysts off-guard. But a closer look into the data suggests that the weakness of inflation has been due largely to transitory factors, which should fade over the …
6th April 2018
The rise in Russian inflation, to 2.4% y/y, last month confirms that the headline rate has passed its trough and we expect it to drift up over the rest of the year as food inflation strengthens. But with headline inflation set to remain below target, the …
The fall in the Turkish lira seen in the past few weeks doesn’t look large enough (yet) to prevent inflation from easing later in the year and to prompt a monetary policy response, not least given that government pressure for looser policy seems to be …
5th April 2018
A rise in interbank rates and weaker net wage growth appear to lie behind the Romanian MPC’s surprise decision to keep its policy interest rate on hold today. We still think that the tightening cycle will be resumed in May, but today’s decision raises the …
4th April 2018
Today’s weaker Turkish inflation reading and soft manufacturing PMI (which provided the first signs of a slowdown in the real economy) has reduced the likelihood that the MPC will tighten monetary policy in the very near term. Elsewhere in the region, …
3rd April 2018
Today’s GDP figures from Turkey showed that growth was a faster-than-expected 7.3% y/y in Q4 of last year. Coming alongside high inflation, this will heighten fears that the economy is overheating. … Turkey GDP (Q4 …
29th March 2018
The statement accompanying today’s MPC meeting in Hungary continued to strike a dovish tone which, given the recent run of weak inflation data, isn’t a surprise. But the softness of inflation has been due to transitory factors that will unwind over the …
27th March 2018
Economic Sentiment Indicators for Central and Eastern Europe (CEE) dipped in most countries this month but still suggest that GDP growth in the region has remained strong at around 5% y/y in Q1. That said, the softer readings provide an early sign that …
The latest activity figures suggest that Emerging Europe’s strong economic performance continued in the early months of this year. Russia’s recovery has resumed following a slowdown in the second half of last year. And it looks like Turkey’s economy has …
26th March 2018
The ruling Fidesz-KDNP coalition looks set to win another majority at the forthcoming Hungarian legislative elections, but after enjoying a period of strong GDP growth and low inflation in its current term, the macroeconomic environment is likely to be …
Russian central bank governor Elvira Nabiullina gave little away at today’s post-meeting press conference about the future path for interest rates, but her overall tone suggests that there’s scope for significant further easing. We remain confident in our …
23rd March 2018
The Turkish lira has steadied in recent days, but the sharp decline seen earlier this month has reinforced concerns about the risks posed by the widening current account deficit. If the government launches further stimulus to boost growth, as has been …
22nd March 2018
Russian activity figures for February were generally a bit weaker than expected, but even so it looks like the economy is on course to grow by about 1.5-1.8% y/y in Q1, up from about 1.0% y/y in Q4. What’s more, the latest data show signs of improvement …
21st March 2018
The batch of Polish activity data for February suggests that the economy continued to expand at a rapid pace in Q1 of close to 5% y/y – broadly in line with Q4’s outturn. Rapid wage growth and looser fiscal policy should support continued strong GDP …
The fall in Russia’s external liabilities over the past few years has reduced the extent to which its economy might be adversely affected by the imposition of additional financial sanctions. By the same token, however, this reduction in external …
20th March 2018
Vladimir Putin’s landslide victory in yesterday’s presidential election has barely caused a ripple in local markets. The focus will now turn to the appointment of a new cabinet, which may provide clues about both policy direction and succession plans …
19th March 2018
The weaker-than-expected Polish inflation figure for February, of 1.4% y/y, means that the MPC is likely to stick to its dovish tone in the very near-term. However, we still think that price pressures will start to build over the coming quarters, pushing …
15th March 2018
The sheer pace of growth in Turkey looks increasingly like a cause for concern and there is mounting evidence that the economy is now overheating. Previous such episodes of overheating have been followed by sharp falls in the lira, large increases in …
14th March 2018
Fiscal policy in Poland is set to be loosened further this year, which is one reason why economic growth is likely to remain strong. There aren’t any imminent concerns about the health of the public finances, but policy looks too loose given the late …
The rise in Romanian inflation – which hit a five-year high last month – appears to have been driven by rapid wage growth and provides further signs that the economy is overheating. As a result, we now think that the National Bank will step up the pace of …
13th March 2018
Q4 GDP breakdowns for the economies of Central and Eastern Europe (CEE) confirmed that last year’s pick-up in regional growth was driven by an improvement in consumer spending and investment. However, there are some worrying signs that the strength of …
8th March 2018
Governor Glapinski struck a dovish tone in the press conference accompanying today’s MPC meeting. However, we think that inflation will rise faster than the central bank anticipates over the coming months, prompting the first hike in the policy rate …
7th March 2018
Russian inflation figures for February confirmed that underlying price pressures remain weak and another cut in the central bank’s policy interest rate at the next Board meeting later this month is almost certain. … Russia CPI …
6th March 2018
The slightly stronger-than-expected Turkish inflation data for February, of 10.3% y/y, means the MPC is likely to stick to its hawkish tone at Wednesday’s MPC meeting. Inflation should begin to edge down in the next few months, but it will remain far …
5th March 2018
The sharp widening of Turkey’s trade deficit in the last few months is a reflection of very strong domestic demand, which has sucked in imports. But the deficit is now approaching levels that, in the past, have quickly been followed by sharp currency …
2nd March 2018
President Putin’s State of the Nation address provided the first signs of his economic goals for his next term. On the face of it, it looks like Putin promised looser fiscal policy, but we think there’s less to this than meets the eye. And more …
1st March 2018
Last month’s manufacturing PMIs for Emerging Europe fell across the region, but are still consistent with strong industrial activity in Central Europe. And while the sharp drop in the Russian survey looks alarming, we would caution against reading too …
We think that the near-term outlook for consumer spending in Poland is bright. A further acceleration in wage growth – together with loose fiscal policy and record-high consumer confidence – should mean that consumer spending rises at a faster pace this …
28th February 2018
The outcome of Russia’s presidential election next month is not in doubt, although it’s still unclear what direction economic policy will take during President Putin’s fourth (and probably final) term. In this Focus, we argue that fiscal and monetary …
27th February 2018
February’s Economic Sentiment Indicators for Central and Eastern Europe (CEE) suggest that growth in the region as a whole may strengthen to more than 5.5% y/y in Q1. The Hungarian and Polish economies seem to be faring particularly well, but there are …
Long-term bond yields in Hungary have risen further this year than those of the country’s peers, despite the central bank’s efforts to bring them down. It seems that markets are coming around to our view that continued loose monetary policy at this late …
26th February 2018
Two widely-watched survey-based measures of price expectations in Poland hit seven-year highs in January, suggesting that core inflation is set to pick up markedly over the course of 2018. This supports our view that the central bank will begin to tighten …
22nd February 2018
The data from Emerging Europe at the start of 2018 have painted a bright picture. Our weighted average of the European Commission’s Economic Sentiment Indicators for Central and Eastern Europe (CEE) hit its highest level since 2008 last month, while …
21st February 2018
Russian activity data for January show that, having slowed over the second half of last year, the economy has now turned the corner. It looks like growth picked up to about 1.3% y/y last month from 1.0% y/y in the final quarter of 2017. … Russia Activity …
19th February 2018
Russia’s economy slowed over the second half of 2017, but the latest data for January suggest that conditions have improved at the start of this year. We expect growth to strengthen over the coming quarters and, indeed, our 2018 GDP growth forecast of …
14th February 2018
GDP data for Central and Eastern Europe (CEE) showed that growth in the region as a whole expanded by 4.9% y/y in Q4. While this is still very strong by recent standards, it’s weaker than Q3’s outturn of 5.5% y/y and is likely to mark the start of a …
The raft of Q4 GDP data for Central and Eastern Europe (CEE) due later this week is likely to show that the region’s economies continued to grow at a rapid pace at the end of 2017, at around 5.3% y/y. But this probably marks the peak of the economic cycle …
12th February 2018
The Russian central bank’s 25bp cut in its policy interest rate (to 7.50%) today was smaller than we had anticipated, but the decision was accompanied by a very dovish statement that paves the way for significantly more easing this year. We remain …
9th February 2018
The Polish MPC left interest rates unchanged today, but recent comments from Governor Glapinski suggest that he is becoming increasingly concerned about the strength of the labour market. We think this is justified and expect strong wage growth to feed …
7th February 2018
The decline in Russian inflation to just 2.2% y/y last month, coming alongside weakness in the latest hard activity data and dovish comments from central bank governor Elvira Nabiullina, means we now expect a 50bp cut in the policy rate (to 7.25%) at …
The widening of budget deficits in Hungary and Romania means that the loose fiscal policy pursued in recent years is set to come to an end in 2018. Growth is likely to slow (sharply in the case of Romania) as this support is removed. In contrast, budget …
6th February 2018
Turkish inflation fell to a lower-than-expected 10.3% y/y last month, from 11.9% y/y in December, and is likely to edge down further over the rest of this year. Even so, with the headline rate likely to remain far above the Bank’s inflation target and the …
5th February 2018
The statement accompanying today’s Czech MPC meeting – at which the policy interest rate was hiked by 25bp – suggests that the Council will hold fire at its next meeting on 29th March. Even so, we think that the tightening cycle will ultimately be larger …
1st February 2018
Russian annual GDP data for 2017, which showed that the economy expanded by 1.5% over the year as a whole, are consistent with a slowdown in growth to 1.0% y/y in Q4, from 1.8% y/y in Q3. However, we think the economic recovery will get back on track this …
January’s PMIs for Emerging Europe provide further evidence that the region’s economies made a strong start to the year. The surveys indicate that Russia’s economic recovery should resume over the coming quarters and that the Central European economies …
January’s Economic Sentiment Indicators for Central and Eastern Europe suggest that growth in the region as a whole may have picked up even further at the start of this year, to about 5.5-5.8% y/y. The Polish economy appears to be faring particularly …
30th January 2018
The preliminary estimate of Polish annual 2017 GDP, which showed an expansion of 4.6% over the year as a whole, suggests that growth may have accelerated to as much as 5.4% y/y in Q4. This appears to be due to a marked improvement in fixed investment. … …
EM inflation remained steady in the final few months of last year, but we think it will drift up over the course of 2018. Higher oil prices will feed through into higher EM fuel inflation over the next few months and, perhaps more importantly, food and …
29th January 2018
