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The statement accompanying the Czech MPC’s meeting – at which it resumed its tightening cycle via a 25bp hike to the policy rate – was more dovish than we had anticipated. Accordingly, we think that the Council will hold fire at December’s meeting and …
2nd November 2017
The victory of the ANO party in the recent Czech election has put the spotlight back onto the rise of populism in Central Europe. In this Update, we take a closer look at the political and economic implications of this shift, and tease out some of the …
1st November 2017
October’s manufacturing PMI for Turkey – which fell to a six-month low – supports our view that following an impressive Q3, growth will slow in Q4. Elsewhere in the region, the Czech PMI painted a much brighter picture and echoes other surveys which …
The argument made recently that Turkey’s GDP data are being manipulated by the authorities and that the recent rapid growth rates aren’t plausible doesn’t seem to square with other available evidence. That said, the statistics office clearly rushed out …
31st October 2017
The Turkish lira has strengthened a little today, but it has been the worst-performing major EM currency this month. We have revisited our forecasts and we now expect further falls in the currency, taking it to 4.00/$ by end-2018 and 4.25/$ by end-2019 …
30th October 2017
This month’s Economic Sentiment Indicators suggest that GDP growth remained strong in the major economies of Central and Eastern Europe at the start of Q4. The surveys are consistent with growth remaining close to 5% y/y in the region as a whole. … …
Aggregate EM inflation ticked down between August and September on the back of a fall in food inflation in East Asia. This appears to have been due to a shift in the timing of holidays in the region and should reverse in October. That being said, while …
27th October 2017
The Russian central bank statement, which accompanied today’s decision to cut the policy rate by 25bp, suggests that policymakers have become increasingly confident that inflation will remain low and that they see more scope for loosening than before. …
The hawkish tone of today’s Turkish MPC statement showed an overdue concern with high inflation (and expectations) and suggests that cuts in interest rates are off the agenda. That said, with inflation set to ease over the first half of 2018 and the …
26th October 2017
Events over the past 24 hours have confirmed our view that, while the centre-right ANO party would prevail in the country’s elections, the challenging part will be forming a coalition government. Financial markets are likely to look through the political …
24th October 2017
Growth in Emerging Europe probably picked up further in Q3, but we think that this will mark the peak in the economic cycle and expect aggregate regional growth to weaken a little next year. Admittedly, Russia’s recovery, which is only in its early …
23rd October 2017
The latest economic data suggest that growth in Emerging Europe as a whole picked up further in Q3 and one of the main drivers behind this appears to have been stronger consumer spending. Retail sales in Russia rose at their fastest pace since 2014 last …
20th October 2017
The surprising jump in Turkish inflation in the past few months appears to be mainly due to a combination of a rise in dairy and egg inflation, the lingering impact of previous falls in the lira as well as a rebound in clothing inflation from oddly low …
19th October 2017
Russian activity data for September suggest that GDP growth over Q3 as a whole probably came in at around 2.0% y/y, which would be a little weaker than in Q2 (2.5% y/y). But the economy remains in reasonably good shape, and the recovery in consumer …
18th October 2017
The batch of Polish activity data for September, released today, suggests that the economy grew by around 4.8% y/y in Q3, which would be the best performance in six years. … Poland Activity Data …
The centre-right ANO is likely to emerge as the single largest party in Friday’s parliamentary election in the Czech Republic, which may open the door to looser fiscal policy. That said, there are reasons to think that any fiscal stimulus would be more …
17th October 2017
Turkey’s recent diplomatic spat with the US – and the subsequent sell-off in financial markets – has refocussed attention on the economy’s external vulnerabilities. We have two areas of concern: the increasing reliance of Turkish banks on wholesale …
11th October 2017
The rise in Czech inflation to a five-year high of 2.7% y/y in September supports our view that the next hike in the policy interest rate – taking it from 0.25% to 0.50% – will come at the CNB Board meeting in early November. … Czech CPI …
9th October 2017
The drop in Russian inflation to a fresh low of 3.0% y/y in September means that another cut in interest rates is all but guaranteed at this month’s CBR Board meeting. The fact that core inflation softened opens up the possibility of another 50bp cut but, …
5th October 2017
Poland’s MPC left interest rates unchanged today and the press statement and conference that followed struck a dovish tone. While headline inflation is likely to edge down in the final months of this year, we expect a pick-up in core inflation to cause …
4th October 2017
The Romanian MPC’s decision to raise its overnight deposit interest rate represents a move to tighten monetary policy – even though the policy rate was left unchanged. Policymakers struck a fairly hawkish tone in the post-meeting press statement and …
3rd October 2017
The jump in Turkish inflation, to 11.2% y/y last month, from 10.7% y/y in August, means that the interest rate cuts we had expected before the end of this year are looking less likely. We still think inflation will fall over the next six to nine months, …
Growth in Emerging Europe has generally surprised on the upside in recent quarters, which is consistent with the above-consensus forecasts we made at the start of this year. We expect further positive surprises from Russia over the next year but think …
2nd October 2017
Last month’s manufacturing PMIs for Emerging Europe painted a positive picture. The surveys suggest that economic growth accelerated further in Q3 in Central Europe and remained robust in Russia. Even in Turkey – the only country where the PMI fell – the …
In this Focus, we answer five key questions on Russia’s recently-approved fiscal rule, and explain what it means for the government’s deficit, debt and oil funds. … A primer on Russia’s new fiscal …
28th September 2017
This month’s Economic Sentiment Indicators for Central and Eastern Europe suggest that regional GDP may have expanded by as much as 5% y/y in Q3. However, this probably marks the peak for growth and we expect the region’s economies to slow over the coming …
The Czech MPC’s decision to keep rates on hold today was a very close call and we think that an interest rate hike at the next MPC meeting on 2nd November is highly likely. Following that, our central view is that there will be a further 50bp of hikes in …
27th September 2017
The move by Hungary’s MPC to loosen monetary policy last week appears to have been aimed at weakening the forint, which looks to us like a step in the wrong direction. The key threat to inflation and external competitiveness stems from rising wages, …
26th September 2017
Worries about spillovers from the independence referendum being held today in Iraq’s Kurdish region have led to a sharp drop in Turkey’s stock market over the past week. However, any impact on Turkey’s real economy from the referendum is likely to be …
25th September 2017
Aggregate EM inflation rebounded in August, having fallen to an eight-year low in July. But while we expect fuel and food inflation to edge up over the coming months, easing core price pressures should keep headline EM inflation subdued. … EM inflation …
The latest data suggest that, following a strong Q2, growth in Emerging Europe as a whole picked up further in Q3. Activity figures from Poland improved in July and August and the early signs are that Turkey’s economy will record very robust growth in Q3, …
20th September 2017
The decision by the Hungarian MPC to ease monetary conditions further today looks like a policy misstep. Mounting capacity constraints and rapid wage growth mean that we think inflation will turn out to be much stronger next year than the central bank …
19th September 2017
Russian activity data for August suggest that GDP growth may have eased a little in Q3, to around 2% y/y, from 2.5% y/y in Q2. But that would still be a reasonably strong pace of expansion, and it looks like the drivers of growth are becoming more broad …
The batch of strong Polish activity data for August suggests that the economy is on course to grow by an impressive 4.5% y/y in Q3, up from 3.9% y/y in Q2. However, this is likely to mark the peak and we expect growth to soften in Q4 and into 2018. … …
There are no clear signs yet that Hungary’s economy is overheating but, by the same token, growing signs that the economy is hitting capacity constraints sit uncomfortably with the MPC’s continued dovish rhetoric. Any move to loosen policy, as looks …
18th September 2017
Russian central bank governor, Elvira Nabiullina, struck a predictably cautious tone at today’s postmeeting press conference. But the large amount of spare capacity in the economy is likely to keep inflation lower than the Bank expects, allowing interest …
15th September 2017
Last month’s jump in inflation prompted the Turkish MPC to adopt a more hawkish line in the statement accompanying today’s meeting, at which interest rates were left unchanged. Even so, with inflation set to ease and growth likely to slow, and government …
14th September 2017
Turkey’s economy had a strong Q2 and growth is set to be even quicker in Q3. But that’s likely to mark the peak in the cycle and we think the economy will slow more abruptly than most expect in 2018. Elsewhere, Czech inflation data for August suggest that …
11th September 2017
A sharp pick-up in Turkish industrial production growth in July, which jumped to 14.5% y/y, was always on the cards given the comparison with July last year, when the manufacturing sector was disrupted by the coup attempt. Even so, today’s data suggest …
8th September 2017
Recently-released GDP breakdowns for the economies of Central and Eastern Europe showed that strengthening consumer spending and investment drove the pick-up in aggregate economic growth to a nine-year high in Q2. However, we think that growth is close to …
7th September 2017
The tone of the press statement and conference that followed today’s MPC meeting in Poland remained dovish. However, there is a hawkish minority on the Council and, as core inflation picks up in the coming months, we expect more MPC members to join this …
6th September 2017
The breathless commentary surrounding the recent bailout of Otkritie by Russia’s central bank appears to have missed some of the more salient points about Russia’s banking sector. As we explain in this Watch, the risk of systemic problems that affect even …
Russian inflation fell to a post-communist low of 3.3% y/y in August and we expect the headline rate to remain below the central bank’s 4% target over our forecast horizon. We had thought the Bank would resume its easing cycle at next week’s Board meeting …
5th September 2017
The jump in Turkish inflation last month to 10.7% y/y means that the interest rate cuts we had expected before the end of the year are looking less likely. That said, we still expect the headline inflation rate to fall again later this year as the impact …
Last month’s manufacturing PMIs for Central Europe suggest that economic growth has remained robust in Q3. That said, we think that the third quarter will mark a peak for growth across the region. … Manufacturing PMIs …
1st September 2017
A combination of a strong currency and the fading impact of a previously-introduced levy on the financial sector has kept a lid on Polish core inflation in recent months. These effects should soon fade and we expect core inflation to pick up over the …
31st August 2017
The uncertainty about how troubles at Otkritie might play out initially pushed up interbank interest rates in Russia, but the Central Bank (CBR) quickly snuffed out the rise using its open market operations. The big picture is that the problems facing one …
30th August 2017
This month’s Economic Sentiment Indicators for Central and Eastern Europe suggest that regional growth has remained robust in Q3, at around 4.5% y/y, but also that growth is now peaking. … Economic Sentiment Indicators …
The Russian central bank’s decision to bail out struggling Otkritie bank provides the clearest sign yet of the damaging legacy from the sharp run-up in credit seen up to 2014. That said, the strong balance sheets of the government and central bank mean …
29th August 2017
The big fall in EM inflation is now behind us but it is likely to remain relatively subdued over the coming months. As a result, despite the recent shift in focus towards monetary tightening in advanced economies, we think more EM central banks are likely …
24th August 2017
