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Ukraine’s economy has seen rare good news over the past month as the IMF released additional funding after a long delay and recent data showed that growth strengthened. Nonetheless, there has been no resolution to the conflict in the east, and that is …
14th October 2016
A decline in tourism receipts caused Turkey’s current account deficit to widen further on a 12-month basis in August and ongoing security concerns will keep tourism revenues subdued and the external shortfall wide in the coming months. … Turkey Current …
12th October 2016
Turkish industrial production rebounded in August, after July’s slump, but the bigger picture is that growth weakened over the first two months of Q3 and September’s manufacturing PMI suggests that activity remained sluggish at the end of the quarter. All …
10th October 2016
The hit to Turkey’s economy from July’s military coup attempt is likely to be short-lived, but even once the impact dissipates, the economy’s large vulnerabilities mean activity will remain sluggish over the next couple of years. We expect below-consensus …
6th October 2016
Today’s data from the Halifax showed that house prices were more or less flat on the month in September. Therefore, it echoes the evidence provided by other indices that house prices have proved resilient to the Brexit vote. … Polish MPC talks of rate …
5th October 2016
There is mounting evidence that the Turkish central bank’s pursuit of loose monetary policy has caused inflation expectations to become unanchored, risking an upward wage-price spiral. As we explain in this Focus, higher inflation is likely to be …
The larger-than-expected fall in Russian inflation to 6.4% y/y in September is unlikely to have any impact on the outlook for monetary policy over the rest of this year, but it does reinforce our view that the headline rate will fall sharply. That should …
4th October 2016
Last month’s manufacturing PMIs suggest that Russia’s gradual recovery continued at the end of Q3, while growth in Central Europe was relatively strong. Elsewhere, the sharper-than-expected fall in Turkish inflation in September, to 7.2% y/y, reinforces …
3rd October 2016
Comments by the Romanian National Bank Governor at this afternoon’s post-meeting press conference suggest that the MPC is inching towards starting a tightening cycle, reinforcing our view that the central bank will begin to hike interest rates gradually …
30th September 2016
The Czech MPC’s post-meeting press conference reinforced our view that it will lift the exchange rate ceiling around the middle of next year. We think it’s unlikely that the koruna will strengthen significantly at that point, although concerns that the …
29th September 2016
The widespread rises in this month’s Economic Sentiment Indicators (ESIs) in Central and Eastern Europe should help to ease concerns about the region’s economic health following a run of weak hard activity data seen earlier in the quarter. Indeed, the …
The fall in oil prices has caused a considerable deterioration in Russia’s budget position, forcing the government to dip into its oil reserves. In this Update, we answer six key questions on the health of Russia’s public finances and where the risks lie. …
28th September 2016
EM inflation is now at a seven-year low. Looking ahead, it is set to ease further in most major commodity producing EMs over the coming months, providing central banks with room to cut interest rates. … EM-wide inflation drops to seven-year …
27th September 2016
Moody’s downgrade of Turkey’s sovereign credit rating this month and the loss of the country’s investment grade status caused a small and short-lived sell-off in local financial markets, but perhaps more importantly it shifted investors’ attention to the …
The Turkish MPC’s decision to cut its overnight lending rate by a further 25bp was accompanied by a clear shift in the Council’s focus to concerns about the economic slowdown. This provides even more reason to think that the MPC will continue to look …
22nd September 2016
Despite growing views to the contrary, it’s not clear to us that the Czech koruna will appreciate sharply as and when the National Bank exits the exchange rate “cap” policy. … Czech koruna not likely to see sharp gains when cap …
The rally in Hungary’s financial markets following its return to investment grade last Friday has grabbed the headlines, but in practice most of the fall in its dollar bond spreads happened in 2012-14. Elsewhere, yields on short-term Czech local currency …
21st September 2016
The decision by the Hungarian MPC to limit the use of its three-month deposit facility has been signalled as an effort to loosen monetary conditions, but recent experience suggests that it’s unlikely to do much to bring down interbank interest rates and …
20th September 2016
Russian activity data for August suggest that the economy continued to pull out of its slump, albeit very slowly. The recovery is still being driven by industry, but there are no signs of improvement in consumer-facing sectors. … Russia Activity Data …
19th September 2016
The sharp improvement in last month’s Polish activity data will ease concerns of a slowdown sparked by July’s weak figures. Our GDP Tracker suggests that growth picked up to around 3.0% y/y last month, from 2.5% y/y in July. … Poland Industrial Production …
The sweeping victory for United Russia in Sunday’s parliamentary vote reinforces the view that President Putin’s grip on power hasn’t been shaken by two years of recession. The direction of policy is unlikely to change as a result. From an economic …
The surprisingly hawkish comments by the Russian central bank Governor at this afternoon’s post-MPC meeting press-conference mean that policy easing is likely to be more gradual than we previously anticipated. We now expect the policy rate to be flat this …
16th September 2016
Russia’s Central Bank has put increasing emphasis on the importance of inflation expectations in making monetary policy decisions, but it seems that these tend to be a lagging, rather than a leading indicator of actual inflation. Accordingly, we think …
9th September 2016
The sharper-than-expected slowdown in Turkish GDP growth in Q2, to 3.1% y/y, predates July’s coup attempt and we expect growth to be much weaker in the coming quarters. Indeed, the early signs suggest that the economy may even contract in q/q terms in Q3. …
The collapse in Turkish industrial production in July provides a clear sign that the coup attempt caused severe disruptions to the economy. And leading indicators such as the manufacturing PMI suggest that activity weakened even further last month. … …
8th September 2016
The fall in Russian inflation to 6.9% y/y in August, coming alongside last month’s drop in household inflation expectations, reinforces our view that the central bank will resume its easing cycle later this month. We expect the benchmark one-week repo …
5th September 2016
The sharper-than-expected fall in Turkish inflation in August, to 8.0% y/y, is likely to be used as justification by the central bank for further modest interest rate cuts. Nonetheless, we remain of the view that inflation is more likely to rise than to …
The latest batch of PMIs from Emerging Europe suggests that, in aggregate, the region’s manufacturing sector strengthened last month. But the surveys provide further evidence that Turkey’s economy has slowed following July’s coup attempt. … Manufacturing …
1st September 2016
It’s been a very calm month for financial markets in most of Emerging Europe. One exception, however, is Ukraine where renewed tensions with Russia have caused the currency to weaken and dollar bond yields to rise. … Ukrainian markets come under pressure …
31st August 2016
The declines in the Economic Sentiment Indicators this month in Central and Eastern Europe support our view that growth in these economies is likely to weaken in the coming quarters. But the strength of consumer spending means that this slowdown will be …
30th August 2016
We expect food inflation in large parts of the EM world to ease in the coming months, which will provide some relief to policymakers in a number of high inflation economies, including Russia, Colombia and Brazil. However, talk of a widespread collapse in …
26th August 2016
The raft of second quarter GDP figures for Emerging Europe released this month painted a relatively bright picture, as regional growth hit a two-year high of 1.5% y/y. However, some of the more timely figures suggest that this improvement may not have …
Growth across Emerging Europe is likely to pick up in 2017-18, but it will be softer than most anticipate. While the region’s largest economy, Russia, will return to positive growth in the coming quarters, the recovery will be sluggish. In Central Europe, …
24th August 2016
The statement accompanying the Hungarian MPC’s meeting earlier today, at which the policy rate was left on hold at 0.90%, gave no sign that monetary easing is on the Council’s agenda. But we think growth and inflation are likely to be lower than the MPC …
23rd August 2016
The decision by the Turkish MPC to cut its overnight lending rate by a further 25bp, to 8.5%, provides further evidence that the Council is paying scant regard to its inflation target and more attention to moves in the currency (which has strengthened). …
The weak Polish activity data for July, which point to GDP growth slowing sharply to 2.5% y/y at the start of Q3, were distorted by working-day effects. Even so, the underlying trend seems to be one of a gradual economic slowdown. … Poland Industrial …
18th August 2016
Russian activity data for July suggest that the economy weakened a touch at the start of Q3, but we still think it’s likely that the recovery will resume over the rest of the year. Indeed, there was an encouraging sign that the slump in the construction …
17th August 2016
The slightly stronger-than-expected Czech Q2 GDP growth figure, of 2.5% y/y, reinforces our view that, while the economy is likely to slow a little further in the coming quarters, the strength of consumer spending means this will only be gradual. … Czech …
16th August 2016
The surprisingly strong batch of Q2 GDP figures for Central and South Eastern Europe released today suggest that growth in the region as a whole picked up to a robust 3.7% y/y from 3.0% y/y in Q1. We still expect growth to slow in the next few quarters as …
12th August 2016
The -0.6% y/y fall in Russia GDP in Q2 is, by our estimates, consistent with a modest rise in output over the quarter. We expect a gradual recovery to continue over the coming quarters. … Russia GDP (Q2 …
11th August 2016
Preliminary Q2 GDP figures for Emerging Europe due later this week are likely to show an encouraging uptick in growth in Central Europe. Meanwhile, output in the region’s largest economy, Russia, probably fell at a slower pace in the second quarter than …
9th August 2016
The weaker-than-expected Turkish industrial production growth figure for June, of just 1.1% y/y, adds to the evidence that the economy had slowed sharply even before July’s coup attempt. … Turkey Industrial Production …
8th August 2016
Russia’s unemployment rate has hardly budged despite the deep economic downturn over the past 18 months. There does, however, appear to be “hidden” slack in the labour market, one implication of which is that the recovery in the economy is unlikely to be …
5th August 2016
The larger-than-expected fall in Russian inflation to 7.2% y/y in July suggests that – barring an upside surprise in this month’s CPI figure – the central bank will resume its easing cycle at the next MPC meeting in mid-September. … Russia CPI …
4th August 2016
The Romanian MPC’s press conference was a little more dovish than we had anticipated, but robust domestic demand and rising inflation mean gradual interest rate hikes still seem more likely than not over the next 12 months. Elsewhere, the Czech MPC’s …
The much sharper-than-expected rise in Turkish inflation in July, to 8.8% y/y, will make it difficult for the central bank to justify any further loosening of monetary conditions. The easing cycle had already seemed to be nearing an end, but we now no …
3rd August 2016
The attempted military coup in Turkey last month doesn’t appear to have triggered a sharp decline in capital inflows, but there are already signs that the hit to confidence will cause domestic demand (and overall GDP growth) to suffer a temporary period …
2nd August 2016
July’s manufacturing PMIs point to a further slowdown in industrial production growth in Central Europe, to around 2% y/y, which could be an early sign of spillovers from the UK’s Brexit vote. However, we would caution against reading too much into these …
1st August 2016
Slightly stronger-than-expected inflation figures, coupled with the renewed fall in the ruble, prompted the Russian central bank to pause its easing cycle today, but we think inflation should resume its downwards trend in the current quarter, clearing the …
29th July 2016
