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Higher oil prices led to sharp rises in inflation across Central and Eastern Europe (CEE) at the end of 2016, and this has further to run in the next few months. All in all, oil prices are likely to push headline rates up by 0.8%-pt on average by March, …
16th January 2017
Dovish comments by Polish National Bank Governor, Adam Glapinski, at this afternoon’s post-meeting conference suggest that the MPC is as focused on growth as it is on inflation. We continue to think that growth is unlikely to strengthen as much as the …
11th January 2017
The plunge in the lira doesn’t, so far, appear to have resulted in significant balance sheet strains, but the rapid rise in private sector FX liabilities suggests that this is still a risk. At the very least, it adds to the reasons to expect the economy …
On past form, the latest fall in the Turkish lira appears to be sufficiently large to trigger an interest rate hike at this month’s MPC meeting. If the Council doesn’t act, that will only reinforce concerns about central bank independence and might force …
9th January 2017
The smaller-than-expected rise in Turkish industrial production in November reinforces the picture that while the economy probably returned to positive growth at the end of last year, the recovery will be sluggish. … Turkey Industrial Production …
The accompanying statement to today’s MPC meeting in Romania was less hawkish than we had expected. Nonetheless, with further fiscal stimulus in the pipeline and economic slack now exhausted, inflation is likely to rise sharply over the coming months. …
6th January 2017
The batch of relatively strong Economic Sentiment Indicators across Central and Eastern Europe in December suggests that, after a disappointing third quarter, GDP growth in the region recovered in Q4. … Economic Sentiment Indicators …
The surprisingly sharp rise in Turkish inflation in December, to 8.5% y/y, was due mainly to a jump in food and energy inflation, although the weakness of the lira is also feeding through into higher core inflation. The headline rate is likely to peak in …
3rd January 2017
Despite mounting speculation that the Czech MPC would hint at removing the koruna cap earlier than previously suggested, today’s MPC press statement was surprisingly dovish. We remain of the view that the cap is most likely to be lifted in mid-2017. And …
22nd December 2016
The press release accompanying the Hungarian MPC’s meeting earlier today suggests that the Council thinks the need for additional monetary easing has diminished. As a result, we have taken the very modest policy easing that we had previously expected out …
20th December 2016
Inflation is set to rise in most emerging economies in 2017 as the drag from lower oil prices continues to unwind. Even so, with underlying price pressures in check, the jump in fuel inflation is unlikely to push headline inflation above central banks’ …
The health of banking sectors in Central and South Eastern Europe (C&SEE) has improved significantly in recent years. And they are now much less exposed to a fresh eruption of financial stress in the euro-zone than they were a few years ago. In contrast, …
The rise in oil prices following the agreement by OPEC and other oil producers to cut output has helped Russian equities and the ruble to outperform for the second consecutive month. Elsewhere, Polish equities have also fared well over the past month and …
19th December 2016
November’s relatively strong Russian activity data were flattered by working-day effects, but they still suggest that the economy is nearing a return to positive growth. Elsewhere, a healthy batch of Polish activity figures for the same month suggests …
The Russian central bank’s post-meeting press conference provided the firmest signs yet that the easing cycle will resume next year. Governor Nabiullina’s comment that Q2 was the most likely time for this suggests that the initial rate cut may come a …
16th December 2016
Most economies in Emerging Europe enjoyed a strong first half of 2016, but regional growth has slowed sharply over the second half of the year. Q3 GDP data showed that the Turkish economy suffered an outright fall in output, due in large part to the …
15th December 2016
Today’s news that Donald Trump has nominated Rex Tillerson to be Secretary of State has clearly increased the chances that US sanctions on Russia will be lifted in the coming years. Were that to happen, it would provide a boost to the Russian economy and …
13th December 2016
The much-sharper-than-expected 1.8% y/y contraction in Turkish GDP in Q3 probably marks the low point of the economy’s coup-induced slump. Nonetheless, the data reinforce our view that most analysts are far too optimistic on the outlook. Revisions to the …
12th December 2016
Our Tracker shows that total capital outflows from the emerging world reached a ten-month high of $75bn last month. This was driven mainly by an acceleration in outflows from China, but it seems that Donald Trump’s election victory has also triggered a …
9th December 2016
The Russian government’s sale of part of its stake in Rosneft to the Qatar Investment Authority and Glencore late yesterday has raised questions about what the deal means for sanctions, the currency and the fiscal positon. In this Update, we answer three …
8th December 2016
Comments by Polish National Bank Governor, Adam Glapinski, at this afternoon’s post-meeting conference support our view that interest rates will be left unchanged next year, not hiked as the markets are pricing in. Moreover, with GDP growth likely to …
7th December 2016
The recently-released breakdowns of Q3 GDP data for Central and South Eastern Europe showed that most major expenditure components weakened, although there was still some encouraging news at a country level. In particular, huge slumps in investment are …
6th December 2016
The further fall in Russian inflation last month, to 5.8% y/y, won’t be enough to prompt the central bank to resume its easing cycle at the rate-setting meeting next week. Nonetheless, we think the decline in inflation will continue into 2017, ultimately …
The volatility in oil prices over the past couple of months has prompted clients to ask us how higher and lower oil prices could affect the outlook for Russia’s economy. In this Focus, we use several scenarios to illustrate this. … What higher and lower …
The surprise fall in Turkish inflation in November means that, at the margin, it looks less likely that the MPC will follow up last month’s interest rate hike with another this month. Nonetheless, with the recent weakness of the lira yet to fully feed …
5th December 2016
Last month’s PMIs for Emerging Europe suggest that growth in the region’s manufacturing sector strengthened between Q3 and Q4. At a country level, the surveys suggest that Russia’s recovery is gathering a little pace. But in Turkey, the PMI indicates that …
1st December 2016
Hopes that Donald Trump’s election victory will bring about the end of economic and financial sanctions on Russia caused the country’s financial markets to outperform those in other emerging markets this month. However, we think Russian markets may have …
30th November 2016
The risks posed by Turkey’s heavy dependence on foreign capital inflows came to a head this month, with the lira falling the furthest of any EM currency in November. This has been driven in part by Donald Trump’s surprise election victory – his fiscal …
Inflation in most commodity-producing EMs will continue to edge down over the coming months as the effects of previous currency falls unwind. This will allow policymakers in almost all of these countries to loosen monetary conditions. … Inflation in EM …
The batch of strong Economic Sentiment Indicators across Central and Eastern Europe this month suggests that GDP growth in the region as a whole recovered in Q4. But while the aggregate picture improved, sentiment worsened in the region’s largest economy, …
29th November 2016
Having slowed in Q3, we expect growth in Emerging Europe to recover over the course of the next year as Russia continues to pull out of recession and investment in the Central European economies rebounds. However, the overall pace of growth will remain …
23rd November 2016
The weaker-than-expected batch of Polish activity data for October suggests that the economy remained sluggish at the start of Q4. Our GDP Tracker points to growth of 2.7% y/y last month, only a touch faster than Q3’s disappointing outturn of 2.5% y/y. … …
21st November 2016
October’s activity data showed that the Russian economy’s slow recovery continued at the start of Q4, driven by improvements in industry. But the fresh downturn in retail spending confirmed that September’s better-than-expected outturn in that sector was …
18th November 2016
The weaker-than-expected preliminary Q3 GDP figures for Central and South Eastern Europe support our view that growth in the region is likely to settle at a more moderate pace of 2.5-3.0% y/y in the coming quarters. … Central & South Eastern Europe GDP …
15th November 2016
The 0.4% y/y contraction in Russia GDP in Q3 appears to be consistent, by our estimates, with a shallow fall in GDP in q/q terms. We do, however, expect the economy to return to positive (albeit sluggish) growth by early next year. … Russia GDP (Q3 …
14th November 2016
The batch of preliminary Q3 GDP figures due next week in Emerging Europe is likely to make fairly disappointing reading. While growth in Central Europe probably remained strong, we think it still slowed (and by more than the consensus expects). Russia’s …
11th November 2016
Troubles in Turkey’s tourism sector caused the current account deficit to widen even further in September, to around 4.7% of GDP. The wide external shortfall means that the lira is likely to remain under pressure, even after the recent sell-off. … Turkey …
Donald Trump’s victory in the US presidential election has raised hopes in some quarters that economic sanctions on Russia will be lifted. As things stand, this is far from certain. But even if sanctions were removed, the benefits for Russia’s economy and …
10th November 2016
Polish National Bank governor, Adam Glapinski, used this afternoon’s post-meeting press conference to indicate that interest rates are most likely to remain unchanged over the course of next year. But his view seems to be based on somewhat optimistic …
9th November 2016
The recent improvement in Turkish business surveys suggests that the collapse in industrial production in September (shown in data published today) was probably a temporary blip. Nonetheless, today’s data, coming on the back of extremely weak activity …
8th November 2016
Russian inflation once again surprised on the downside, falling to 6.1% y/y in October. This is unlikely to cause the central bank to change its mind, and interest rates will almost definitely be kept on hold at the MPC meeting in December. But today’s …
3rd November 2016
October’s manufacturing PMIs suggest that the recovery in the Russian economy resumed at the start of Q4 after a disappointing Q3. The surveys also provided early signs that the Turkish economy is coming out of the slump triggered by July’s military coup …
1st November 2016
The Central Bank of Russia’s statement accompanying its decision to keep the policy rate at 10.0% today was predictably hawkish and supports our view that monetary easing will be gradual. But the markets are underestimating the extent to which inflation …
28th October 2016
This month’s Economic Sentiment Indicators (ESIs) for Central and Eastern Europe suggest that GDP in the region as a whole expanded by a robust 3.5-4% y/y at the start of Q4. The Polish and Czech economies fared particularly well. … Economic Sentiment …
EM inflation has been driven largely by moves in commodity prices this year. The decline in food inflation seen in recent months has probably now happened, and rising fuel inflation is set to push EM headline inflation back up in the coming months, by an …
27th October 2016
The past month brought further signs of a slowdown in regional growth in Q3. Turkey is the main culprit. Growth there appears to have slowed to a crawl following July’s coup attempt, which hit consumer spending and investment, and exacerbated the downturn …
25th October 2016
Domestic political risks have taken a toll on Emerging Europe’s two worst performing currencies – the Turkish lira and Romanian leu – over the past month. For the lira, in particular, we think deepening concerns about domestic politics and large external …
21st October 2016
The Turkish MPC didn’t rule out a resumption of its easing cycle following the surprise decision to leave interest rates unchanged today, but for our part we think that further falls in the lira and the worsening inflation outlook mean the next big move …
20th October 2016
Activity data for September suggest that the Russian recovery may have stalled in the third quarter, which was largely the result of weakness in the industrial sector. Overall, we think that GDP contracted by 0.5% in Q3. … Russia Activity Data …
19th October 2016
The weaker-than-anticipated batch of Polish activity data for September were by no means a disaster, and the figures suggest overall GDP growth edged down to around 2.8% over Q3 as a whole, compared with 3.1% in Q2. … Poland Industrial Production & Retail …
