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The Central European economies have enjoyed a period of strong economic growth, but exports have been a relative (and perhaps surprising) weak spot. This appears to reflect a general weakening of demand for the region’s car exports, which has been …
29th January 2018
Most economies in Emerging Europe had a very strong end to 2017, but we expect regional growth to soften in the coming quarters. The economic cycle in Central Europe is now looking mature and growth is likely to weaken gradually. Inflation will rise …
26th January 2018
December’s activity data for Russia suggest that GDP growth over Q4 as a whole may have slowed to a disappointing 1.0% y/y, from 1.8% y/y in Q3. But conditions improved right at the end of last year, and we think growth will strengthen over the course of …
25th January 2018
Growth in Emerging Europe as a whole slowed in Q4, having hit a six-year high in Q3. But most of that slowdown came in the region’s largest economy, Russia, whose recovery stuttered. Weakness there seems to be the result of the fall in oil production …
23rd January 2018
The Polish activity figures for December were weaker than November’s data, but most of that can be explained by working-day effects. Our Tracker suggests that the economy grew by a strong 4.8% y/y or so in Q4. That would be broadly in line with Q3’s …
19th January 2018
The news flow in Central and Eastern Europe (CEE) in the past few weeks has been dominated by political troubles, but currencies have performed surprisingly well. One reason for this is likely to be the region’s relatively strong economic fundamentals. … …
The Turkish MPC’s decision to keep all of its key interest rates unchanged today was accompanied by a statement that indicates the Committee is more determined to bring inflation back under control. This supports our view that rates will be kept at …
18th January 2018
Hungary’s central bank has started two new policies this week aimed at bringing down bond yields, including the first QE programme in an emerging market. But there are reasons to think that the impact of these measures on yields may not be as large as …
Russia’s economy lost steam in the second half of 2017, but we expect the recovery to get back underway this year as the drag from lower oil production fades and demand strengthens. We continue to forecast GDP growth of 2.5% over 2018 as a whole, which …
11th January 2018
The Polish MPC left interest rates unchanged today, but the post-meeting press conference highlighted that a hawkish faction exists on the Council. We think inflation will rise above target in the coming quarters, which should be enough to prompt a …
10th January 2018
The Romanian MPC’s hawkish post-meeting press statement, which followed the decision to hike the policy interest rate earlier today, supports our view that monetary policy will be tightened by more than most anticipate over the course of 2018. … Romanian …
8th January 2018
December’s Economic Sentiment Indicators suggest that the pace of GDP growth remained extremely strong in the major economies of Central and Eastern Europe in Q4, at around 5.0-5.5% y/y. … Economic Sentiment Indicators …
The decline in Turkish inflation in December, to 11.9% y/y, from 13.0% y/y in November, will take some pressure off the central bank to follow up last month’s interest rate hike with further tightening. Even so, with headline inflation likely to remain …
3rd January 2018
December’s PMIs for Emerging Europe suggest that manufacturing sectors across most of the region ended 2017 on a strong note. Indeed, the surveys for Central Europe and Turkey are consistent with industrial production growth of 10% y/y or so. … …
2nd January 2018
The decision by the European Commission to trigger an Article 7 procedure against Poland is unlikely to have a major impact on the economy in the short-term. Poland’s structural fund inflows can’t be removed as part of the Article 7 procedure and the most …
20th December 2017
The statement accompanying today’s MPC meeting in Hungary continued to strike an extremely dovish tone but, reading between the lines, it does seem that the rhetoric is gradually starting to shift. Our base case is that a rise in inflation next year will …
19th December 2017
EM inflation was steady between October and November, but the big picture is that it is up from the multi-year trough reached in the summer and will continue to rise over the course of 2018. … EM inflation to rise in …
The disappointing batch of Russian activity data for November suggests that GDP growth may be on course to slow to 1.0-1.5% y/y in Q4. And the risks to our above-consensus growth forecast for 2018, of 2.5%, are building. In contrast to Russia, the latest …
The recovery in the Russian economy this year has been stronger than most expected, but ongoing problems among small and mid-tier banks have slipped under the radar. This was underlined last week by the central bank’s bailout of Promsvyazbank, the 10th …
The decision by Russia’s central bank to cut interest rates by a larger-than-expected 50bp today caught the market (and ourselves) by surprise but the scale of the cut, as well as the tone of subsequent comments from Governor Nabiullina, reinforce our …
15th December 2017
The Turkish central bank’s decision to opt for a smaller hike in its late liquidity rate today than markets had anticipated seems to reflect political pressure not to tighten policy substantially. The lira has already fallen by 1% against the dollar since …
14th December 2017
The sheer pace of annual GDP growth in Turkey in Q3 was flattered by base effects, but a closer look at the data shows worrying signs that strong growth has contributed to the recent jump in inflation and is resulting in a fresh build-up of external …
13th December 2017
The sharp pick-up in Turkish GDP growth in Q3, to a six-year high of 11.1% y/y, was flattered by the comparison with Q3 of last year, when output was disrupted by the coup attempt. The annual rate of growth is likely to slow sharply in the coming …
11th December 2017
The sheer pace of GDP growth across Central and Eastern Europe in Q3 has raised a few eyebrows. For now, there are few signs that economies in the region are overheating. But we are becoming increasingly concerned that policymakers are falling behind the …
8th December 2017
Speculation that US sanctions could be expanded to include sovereign debt have caused a stir in the Russian bond market. It is still far from certain that this will happen. But were it to materialise, it would mainly affect newly-issued bonds – these …
7th December 2017
The surprisingly dovish tone taken by Governor Glapinski in the press conference accompanying today’s MPC meeting belies the hawkish shift in sentiment across the Council as a whole. In spite of the governor’s rhetoric, we think the first interest rate …
5th December 2017
The decline in Russian inflation to just 2.5% y/y last month means the central bank is now all but certain to continue its easing cycle next week. We expect a 25bp cut to 8.00%. Inflation has probably reached a trough, but we think it will remain below …
The continued strong run of Czech wage data has been driven by a tightening of labour market conditions. With labour shortages continuing to mount, wage growth is set to remain rapid over the coming quarters, keeping inflation above the central bank’s …
4th December 2017
The jump in Turkish inflation to a fourteen-year high of 13.0% y/y in November, from 11.9% y/y in October, will undoubtedly alarm policymakers at the central bank. With the government seemingly willing to tolerate tighter monetary policy, we have …
Russia’s participation in the OPEC deal to cut oil output, which was rolled over last night, has so far had only a modest impact on the economy and can account for just 10% of the slowdown in annual GDP growth between Q2 and Q3. It is likely to have a …
1st December 2017
Last month’s manufacturing PMIs suggest that GDP growth has remained strong in Central Europe in Q4, probably at around 4.5-5.0% y/y. The pick-up in Russia’s PMI was also encouraging in light of the recent weakness in industry. … Manufacturing PMIs …
In this Focus, we highlight the scale of Turkey’s credit boom and warn that the build-up of vulnerabilities in the banking sector is more of a concern than most acknowledge. … An anatomy of Turkey’s credit …
30th November 2017
November’s Economic Sentiment Indicators suggest that the pace of economic growth has remained strong in the major economies of Central and Eastern Europe in Q4. The surveys are consistent with growth of around 5% y/y in the region as a whole. … Economic …
29th November 2017
Recently-released figures showed that GDP growth in Central and Eastern Europe (CEE) picked up to a post-financial crisis high of 5.3% y/y in Q3. Growth strengthened in most countries in the region – the exceptions being the relatively small economies of …
24th November 2017
Core inflation has been slower to rise in Poland than in the rest of Central Europe this year, but survey-based measures of price expectations suggest that it is set to pick up markedly over the coming quarters. This is consistent with the underlying …
22nd November 2017
The Hungarian MPC left both its three-month and overnight deposit rates on hold today but the Council announced unconventional measures to ease policy, including interest rate swaps and a mortgage bond purchase programme. Further details of these measures …
21st November 2017
The drop in the Turkish lira over the past month has already prompted the central bank (CBRT) to nudge up the average cost of the funding it provides to commercial banks and to begin auctioning non-deliverable forward contracts in an effort to shore up …
EM inflation dropped to an eight-year low in the middle of this year, but it has now started to rise. The recent increase in oil prices will have pushed it higher this month. And a combination of rising food inflation and a build-up of core price …
20th November 2017
Russia’s activity data for October suggest that growth remained soft at the start of Q4, at around 1.7% y/y. October data for Poland (also released today) were much stronger and suggest that GDP growth may have picked up to as much as 5% y/y. … Russia & …
We don’t find compelling evidence to support the argument that the slowdown in Russia’s economy in Q3 was the result of mounting capacity constraints. In contrast, our view is that there is still a sizeable amount of spare capacity in the economy. This is …
17th November 2017
The European Parliament moved one step closer to sanctioning Poland earlier this week in response to the government’s controversial proposals to reform the judiciary. In this Update, we explain how this (convoluted) process works, and why sanctions …
Third quarter GDP data for Central and Eastern Europe (CEE) showed that growth in the region as a whole picked up to a nine-year high of 5.3% y/y. We still think growth will slow in 2018, but today’s data mean the risks to our forecasts lie to the upside. …
14th November 2017
Russian GDP growth in Q3 was softer than expected, at 1.8% y/y, and we have revised down our growth forecast for 2017 as whole as a result (to 1.8%). However, we expect growth to pick up next year and our 2018 forecast of 2.5% is above consensus. … Russia …
13th November 2017
The batch of preliminary Q3 GDP figures due next week in Emerging Europe are likely to show that growth accelerated in most of the region. While the pace of expansion probably softened a touch in Russia, it appears to have strengthened in Central Europe, …
9th November 2017
The rise in Czech inflation to a five-year high of 2.9% y/y in October was driven entirely by a sharp pick-up in food inflation, and by our estimates, core inflation eased a little. As a result, while the chances of a rate hike at the MPC meeting in …
The Polish MPC left interest rates unchanged today, but the post-meeting press release seems to confirm that the Council is becoming more hawkish. We think inflation will rise above target in the first half of next year, which should ultimately prompt …
8th November 2017
The Romanian MPC’s decision to raise its overnight deposit interest rate represents a move to tighten monetary policy further. And the hawkish post-meeting press statement supports our view that interest rates are likely to be raised by more than most …
7th November 2017
The fall in Russian inflation to 2.7% y/y in October means another 25bp cut at the central bank’s Board meeting in December is highly likely. Inflation has probably reached a trough, but we expect the headline rate to remain below the central bank’s 4% …
Romania’s widening current account deficit is not quite as alarming as the headline figure would suggest, but rapid import growth has still increased the country’s dependence on capital inflows. With the government continuing to loosen fiscal policy, we …
6th November 2017
The jump in Turkish inflation last month, to 11.9% y/y, was worryingly broad based. There are reasons to think that inflation will begin to fall significantly from December, but in the near-term policymakers at the central bank will keep monetary …
3rd November 2017
