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February’s weak batch of Russian activity data were distorted by working-day effects, and we think the underlying picture is still one of a gradual recovery. … Russia Activity Data …
21st March 2017
The weaker-than-anticipated batch of Polish activity figures for February confirmed our suspicion that January’s extremely strong data couldn’t be sustained. Nonetheless, the big picture is that the Polish economy has made a good start to the year and …
17th March 2017
The jump in speculative inflows to the Czech Republic since the start of the year has increased the likelihood that the central bank will bring forward its planned exit from the koruna cap and that the currency may overshoot its ‘fair value’ once this …
The economies of Emerging Europe have made a good start to the year and we expect growth to pick up further in the coming quarters. The recovery in the region’s largest economy, Russia, is likely to be stronger than most expect. We think that this will be …
The Turkish central bank had good domestic reasons to tighten monetary policy today given growing concerns about inflation. But the Fed’s rate hike last night made their job easier by providing some cover from political pressure from the government to …
16th March 2017
The focus ahead of Turkey’s constitutional referendum, taking place in a month’s time, has been on the political ramifications, but relatively little has been said about the economic impact. Our sense is that a ‘yes’ victory (in favour of the amendments) …
The further rise in Polish inflation last month, to 2.2% y/y, was driven almost entirely by energy and food price movements, while core inflation remained subdued. Accordingly, today’s data are unlikely to prompt a shift in the MPC’s dovish stance. … …
14th March 2017
A higher energy import bill caused Turkey’s current account deficit to widen even further in January, taking it to around 4.2% of GDP. As a result, the lira remains one of the most vulnerable EM currencies to tighter monetary policy in the US. … Turkey …
13th March 2017
Last month’s stronger-than-expected rise in Czech headline inflation was driven entirely by higher food and fuel inflation and, on its own, is unlikely to be of too much concern to the National Bank’s MPC. However, taken together with the large rise in …
9th March 2017
The dovish stance taken by the Polish MPC in its post-meeting press conference reinforces our view that, despite the recent rise in inflation, monetary policy will remain loose over the next couple of years. We think the Council is likely to keep the …
8th March 2017
Stronger-than-expected Turkish industrial production growth in January provides further evidence that the economic recovery from last year’s slump is underway. But even so, we think most analysts are too optimistic on how strong the rebound will be. … …
The recently-released breakdowns of Q4 GDP data in the Central and South Eastern European economies showed that the pick-up in regional growth at the end of last year was driven by an encouraging improvement in exports. But it wasn’t all good news. The …
7th March 2017
The recent rise in the Turkish central bank’s holdings of government debt doesn’t appear to be the backdoor effort to ease monetary policy that some fear. Even so, the concerns this has raised highlight the extent to which the Bank’s credibility has been …
The fall in Russian inflation, which reached a five-year low of 4.6% y/y last month, has further to run and we think the headline rate will reach the central bank’s target by mid-year. Falling inflation should open room for significant rate cuts – we …
The decline in Russian inflation has further to run and we think it will fall below the central bank’s target in the coming months. The central bank has adopted an extremely hawkish posture, but this is likely to change as inflation falls to target. …
6th March 2017
The jump in Turkish inflation last month, to 10.1%, probably marks the peak this year, but the headline rate will remain far above the central bank’s target. Despite the dire inflation outlook, the recovery in the lira since January means that, as things …
3rd March 2017
Last month’s PMIs for Emerging Europe suggest that in aggregate, the region’s manufacturing sector weakened from January, but it remained strong. The surveys from Central Europe were robust and point to industrial production growth of 8-9% y/y in the …
1st March 2017
Russia’s weekly CPI figures have become increasingly misleading, which appears to have resulted in a tendency for forecasters to underestimate how quickly headline inflation would ease. Looking deeper into the data, the inflation slowdown seems to be due …
28th February 2017
EM inflation jumped in January on the back of a rise in fuel price inflation. However, this was driven entirely by base effects stemming from the drop in oil prices at the start of last year. These effects should fade in the coming months meaning that …
In aggregate, February’s Economic Sentiment Indicators for Central and Eastern Europe were a little weaker than in January, but overall they add to the impression that the region’s economies made a strong start to the year. … Economic Sentiment Indicators …
27th February 2017
The Russian ruble and Turkish lira have been among the best performing EM currencies this month, but we don’t think their rallies will be sustained. It seems most likely that the ruble will settle roughly at its current level, and we expect the lira to …
24th February 2017
Russia’s recent recession has opened up a sizeable output gap, one consequence of which is that GDP growth in the next couple of years could be a little stronger than most expect. However, the economy’s medium-term growth prospects are the weakest of any …
23rd February 2017
The latest data suggest that the economies of Emerging Europe got off to a good start to the year. Our regional aggregates of the manufacturing PMIs and the European Commission’s Economic Sentiment Indicators both rose to multi-year highs last month. …
22nd February 2017
The full complement of Russian activity data for January, released today, suggests that the economy probably grew by around 0.3% y/y at the start of this year, which appears to be in line with growth in Q4 of last year. … Russia Activity Data …
Revisions to Russia’s industrial production data, which show that the manufacturing sector’s performance in 2015-16 was much better than previously thought, mean it now looks like the economy returned to positive GDP growth around the middle of last year. …
21st February 2017
The much stronger-than-expected batch of Polish activity figures for January was flattered by working-day effects, but overall the data suggest that the economy may have grown by as much as 3.5% y/y at the start of this year. … Poland Industrial …
17th February 2017
There doesn’t appear to be any strong justification for the 5% appreciation of the ruble against the dollar this month and we think the currency will revert to its historic relationship with global oil prices over the rest of the year. On the basis of our …
16th February 2017
Growth in Central and South Eastern Europe strengthened at the end of last year on the back of an acceleration in Poland and Romania. Nonetheless, we see little in today’s GDP data to change our view that growth across the region will settle at 2.5-3.0% …
14th February 2017
The jump in Polish inflation last month, to 1.8% y/y, was driven almost entirely by energy and food price movements, while core inflation remained flat. Accordingly, we remain of the view that the policy interest rate will remain on hold this year. … …
13th February 2017
The further rise in Czech inflation last month, to 2.2% y/y, reinforces our view that the koruna cap will be removed in the coming months. We see the MPC meeting on 4th May as the most likely date for the policy shift. … Czech CPI …
10th February 2017
The dovish tone of the Polish MPC’s post-meeting press conference this afternoon reinforces our view that the policy interest rate will be kept at its current historic low of 1.50% throughout 2017-18. This stands in contrast to the markets, which are …
8th February 2017
Weaker-than-expected growth in Turkish industrial production in December, of 1.3% y/y, supports our view that the recovery from Q3’s downturn will be sluggish. It looks like the economy may have grown by around 1.5% y/y over Q4 as a whole. … Turkey …
The fairly hawkish post-meeting press conference and upwards revisions to the central bank’s inflation forecasts suggest that the Romanian MPC is increasingly concerned about the prospect of loose fiscal policy feeding into stronger core price pressures. …
7th February 2017
The further fall in Russian inflation last month, to 5.0% y/y, supports our view that, despite the central bank’s recent hawkish rhetoric, interest rates will be lowered substantially this year. … Russia CPI …
6th February 2017
The hawkish statement by the Central Bank of Russia that accompanied today’s decision to leave the policy rate on hold has prompted us to revise up our end-year interest rate forecast (to 8.25%, previously 7.50%). Nonetheless, we still think inflation …
3rd February 2017
The sharp rise in Turkish inflation last month, to 9.2% y/y, was due largely to higher petrol and food inflation. The impact of the weaker lira on core inflation has been surprisingly muted so far. At the margin, today’s data make it more likely that the …
The upwards revisions to the Czech National Bank’s inflation forecasts and the relatively hawkish post-meeting press conference reinforce our view that the Council’s koruna cap policy will end fairly soon. We think that the MPC meeting on 4th May is the …
2nd February 2017
Russia’s new “fiscal rule”, which takes effect this week, is unusual insofar as it governs how the budget deficit is financed, rather than anchoring either the size of the deficit or the scale of government expenditure to oil prices (as is more normal). …
1st February 2017
The preliminary estimate of Russian 2016 GDP, which showed a small contraction of 0.2% over the year as a whole, was a bit better than expected and is consistent with the idea that the economy returned to positive growth in the final quarter of last year. …
Last month’s PMIs for Emerging Europe indicate that the region’s manufacturing sectors made an impressive start to the year. The surveys suggest that industrial production growth in Central Europe could pick up to 8% y/y in the coming months, from a …
The sharp fall in the Turkish lira already this year, and the disappointing response by the central bank, have prompted us to revise our currency forecast down. We now see it ending the year at 4.00/$ (previously 3.75/$) and 2018 at 4.25/$ (4.00/$ …
31st January 2017
The large upwards revisions to Turkey’s investment rate don’t mean the economy’s growth prospects are now much stronger. The changes mainly appear to reflect the country’s residential property boom being captured more accurately. Accordingly, we still …
January’s Economic Sentiment Indicators in Central and Eastern Europe suggest that most economies in the region made a strong start to this year. In particular, today’s data support our view that growth in both Poland and Hungary will be faster this year …
30th January 2017
A pick-up in fuel price inflation is set to push up headline inflation in many EMs over the coming months. But this is not true across the board. In some countries, including Brazil and Russia, any pick-up in fuel inflation looks likely to be more than …
26th January 2017
Russia’s construction and retail sectors suffered a fresh slump in December but, overall, it looks like the economy expanded in year-on-year terms in Q4 (by around 0.3%) for the first time since 2014. … Russia Activity Data …
25th January 2017
The Hungarian MPC kept its policy interest rate unchanged earlier today and the accompanying statement remained dovish in spite of a jump in inflation at the end of 2016. Looking ahead, with growth set to fall short of the central bank’s lofty …
24th January 2017
Today’s interest rate hike by the Turkish central bank was just large enough to buy support for the lira, but we think further hikes in the key policy rates will, ultimately, be needed in the coming months. Moreover, there were worrying signs that the MPC …
The sharp fall in the Turkish lira has forced the central bank to tinker with its monetary policy setup in an effort to shore up the currency, and we think hikes in key policy interest rates loom. Earlier this month, the Bank lowered reserve requirement …
We think it is most likely that the Czech MPC will remove the koruna ceiling at its meeting on 4th May. Following this, we are forecasting that the koruna will appreciate to 25.5/€ from 27/€ at present. … Czech koruna: when will cap be lifted and how far …
19th January 2017
Polish activity data for December suggest that GDP growth over Q4 as a whole came in at 2.3% y/y, down a touch from 2.5% y/y in Q3. … Poland Industrial Production & Retail Sales …
