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Inflation in a number of EM commodity producers has remained stubbornly high over the past few months. Accordingly, consensus expectations for monetary policy in these countries have moved towards our more hawkish forecasts. … Inflation in EM commodity …
28th July 2016
The widespread rises in Economic Sentiment Indicators across Emerging Europe this month provide an early sign that the region’s economies have so far been unscathed by the UK’s vote to leave the EU. … Economic Sentiment Indicators …
Turkish financial markets have started to recoup some of their losses following the failed military coup earlier this month, but we think that the lira in particular is more likely to fall than to rise from here on. Currencies and equities elsewhere in …
27th July 2016
The Hungarian MPC seemed to pour cold water on the prospect of additional monetary policy easing in the statement accompanying today’s rate-setting meeting. However, we think the Council is still too optimistic about the economy’s growth prospects as well …
26th July 2016
The failed military coup in Turkey and subsequent government backlash have dominated investors’ concerns over the past week and triggered a sell-off in local financial markets. Policymakers have already taken steps to try to diminish financial stress and …
22nd July 2016
Turkey’s financial markets have fallen sharply following Friday night’s attempted coup and the subsequent backlash by the government, but the reaction appears relatively mild given the enormity of recent events. … Putting the Turkish market sell-off into …
21st July 2016
The Turkish MPC’s decision to cut its overnight lending rate by a further 25bp today suggests the Council views the market volatility stemming from Friday night’s attempted coup (and growing concerns about political risk) as short-lived. And given today’s …
19th July 2016
Russia’s activity data for June suggest that output probably contracted at the same pace in Q2 as it did in Q1. Industry has remained the key driver of the economy, but this has been offset by weak consumer spending and a large drag from construction. … …
June’s strong activity data from Poland were flattered by working day effects, but the underlying trend seems pretty strong. Indeed, the figures suggest that GDP growth may have picked up to around 3.5% y/y over Q2 as a whole. … Poland Industrial …
The near-term economic impact of Friday night’s attempted coup in Turkey will depend on the length and severity of market dislocation, but at the very least the economy is likely to suffer a period of slower growth, and the lira will remain under …
18th July 2016
The market sell-off triggered by the UK’s vote to leave the EU has reversed, but there is still uncertainty about what a post-Brexit Europe will look like and in the meantime signs of strain are appearing in other parts of the continent’s financial …
15th July 2016
Despite May’s sharper-than-expected rise in Turkish industrial production, growth over Q2 as a whole appears to have been weaker than in Q1. Meanwhile, May’s balance of payments data showed another encouraging fall in the current account deficit, but that …
14th July 2016
Planned changes by the National Bank of Hungary to its benchmark three-month deposit facility announced this afternoon could act to loosen monetary conditions, although in practice they seem unlikely to have a particularly large impact. … Hungary revamps …
12th July 2016
The Russian economy is through the acute phase of its crisis and a recovery should begin over the coming quarters. However, it will be extremely weak. We expect the economy to stagnate over 2016 as a whole and grow by just 1.5% in 2017. Inflation and …
11th July 2016
The Polish MPC used this afternoon’s post-meeting press conference to suggest that it was broadly unconcerned about the impact of the UK’s vote to leave the EU on the domestic economy, but we think Brexit may cause growth to be a little weaker than the …
6th July 2016
The negative economic spillovers on Central and South Eastern Europe from the UK’s vote for Brexit are likely to be smaller than many fear, but they will still drag on activity in the region. Accordingly, we have made some modest downwards revisions to …
The much sharper-than-expected rise in Turkish inflation last month, to 7.6% y/y, confirms our view that the recent falls in the headline rate were unsustainable. The central bank might still use last month’s modest fall in core inflation as justification …
4th July 2016
Early signs suggest that Russia’s economic recovery may have stalled in the second quarter due largely to renewed weakness in the construction sector. This seems to be the result of financial problems at construction companies combined with the effect of …
1st July 2016
This report is only available as a PDF. Click to download. … Emerging European markets underperform after Brexit vote …
30th June 2016
The sell-off in the majority of EM currencies in the wake of the Brexit vote is unlikely to have a significant impact on inflation in most of the emerging world. That said, it is likely to cause concern for policymakers in a handful of countries, most …
29th June 2016
This month’s Economic Sentiment Indicators in Emerging Europe suggest that growth in the region as a whole eased a touch at the end of the current quarter. These data don’t capture the impact from the UK’s vote for Brexit, although as we’ve argued before, …
There are already signs that the UK’s vote to leave the EU is emboldening populist and anti-EU sentiment in Central and Eastern Europe (CEE). Given that the region is a major beneficiary from the EU’s budget, the economic incentives suggest a departure …
28th June 2016
The UK’s vote to leave the EU in yesterday’s referendum is likely to cause further turbulence in Central and Eastern European (CEE) financial markets in the coming days and weeks. As things stand, we think that the vote will have a smaller near-term …
24th June 2016
The focus of investors in Central and Eastern Europe (CEE) is now squarely on the UK’s Brexit vote tomorrow. CEE has the largest linkages with the UK of any EM region, and so is more exposed to potential spillovers in the event that the UK votes to leave …
22nd June 2016
Hungary’s MPC made it clear today that further interest rate cuts are unlikely. And while the Council hinted at more “unconventional” policy loosening, we doubt that this would have a significant impact on overall monetary conditions. Elsewhere, following …
21st June 2016
Today’s weaker-than-expected Russian activity data for May provide early signs that the fall in GDP in Q2 may be larger than in Q1. Consumer-facing sectors continued to bear the brunt of Russia’s economic problems, although industry improved further. … …
20th June 2016
The decision this month by Russia’s central bank to lower interest rates after a hiatus of close to a year has been followed by fairly hawkish comments from policymakers making clear that this does not necessarily mark the start of a new easing cycle. …
Today’s batch of Polish activity data for May was disappointing and as things stand growth in Q2 is shaping up to be a little slower than Q1’s 3.0% y/y. But the slowdown has been modest and today’s figures are unlikely to have much bearing on monetary …
17th June 2016
Concerns about the emergence of economic populism in Central and Eastern Europe are on the rise once again. This is already weighing on local financial markets and, although it’s not likely to have an imminent impact on economic activity in the region, it …
The decision by Russia’s central bank to cut its benchmark one-week repo rate by 50bp to 10.50% today was a close one but, having decided to start easing policy once again we think that interest rates will now fall further than the consensus is currently …
10th June 2016
Growth in the Turkish economy slowed a little in Q1, but it was still extremely strong at 4.5% y/y in working day adjusted terms. Consumption remained the key driver of growth, while investment contracted. The strength of consumer spending makes recent …
The EU’s sanctions on Russia are due to expire in July and, while it is most likely that they will be renewed, it is possible that this comes alongside a broad timetable for scaling them back subject to certain conditions having been met. In this Update , …
9th June 2016
The sharp slowdown in Turkish industry in April suggests that, after a relatively strong Q1, the economy probably slowed at the start of the second quarter. It looks like the boost to the manufacturing sector from the earlier falls in the lira is fading. …
8th June 2016
The breakdown of Q4 GDP data for Central and South Eastern Europe confirmed that the slowdown in growth at the start of the year was the result of a drop in fixed investment, most likely caused by weaker inflows of EU structural funds and more general …
7th June 2016
Russian inflation remained unchanged at 7.3% y/y in May for the third consecutive month, but it looks like it is on course to edge up over the coming months. As a result, we think that the central bank will continue to resist calls to cut rates. We expect …
6th June 2016
Growth in Emerging Europe is set to strengthen over the next few quarters, helped in part by the fact that the drag from Russia will ease as it exits recession. However, while the acute stage of Russia’s crisis has passed, the recovery over 2016-17 will …
2nd June 2016
After a period of relative calm, growing political tensions have once again led to a deterioration in sentiment towards Turkey. As it happens, we think the country’s growth prospects over the next 6-9 months remain reasonably good. But deep-seated …
1st June 2016
Manufacturing PMIs strengthened in most countries across Emerging Europe in May. The rise in the PMIs in Central Europe (Poland, Hungary and the Czech Republic) provides further evidence that the recent weakness in industry was a temporary blip. But while …
The unwinding effects of big exchange rate falls on import prices will continue to drive down inflation in a number of major EMs over the coming months. In those EMs that haven’t experienced a great deal of currency depreciation, the fading impact of oil …
26th May 2016
Russia's first Eurobond issue in three years showed that Western sanctions are no longer preventing the government from raising funds overseas – but by the same token, the amount raised ($1.75bn) was relatively small and came at a price. We estimate that …
25th May 2016
Having cut its policy rate by 15bp to 0.90% earlier today, the National Bank of Hungary’s MPC used the accompanying press release to comment that interest rates would now be left unchanged. In contrast, we think today’s interest rate cut in Turkey is …
24th May 2016
The improvement in the Russian activity data for April, coming on the back of last week’s better-than expected Q1 GDP figures, provides further evidence that the economy is on a slow path to recovery. But conditions remain difficult and the economy is …
23rd May 2016
With one month to go to the UK’s referendum on whether to remain in or leave the EU, concerns are growing in some quarters that a “Brexit” vote could harm Central and Eastern Europe (CEE). As things stand, it seems unlikely that there will be a …
The strength of Polish activity data for April, released today, confirms our suspicion that the weakness seen in Q1 was likely to prove temporary. Indeed, it looks like the economy expanded by around 3.5% y/y at the start of Q2. … Polish Ind. Production & …
19th May 2016
The slowdown in Czech GDP in Q1, to 3.1% y/y from 4.0% y/y, confirms that last year’s bumper growth rates were temporary. But the economy is still strong and today’s figures, coming alongside continued improvements in the labour market and rising …
17th May 2016
The shallower-than-expected 1.2% y/y fall in Russia’s GDP in the first quarter confirms that the acute phase of the crisis is now over. And the annual growth rate could return to the positive territory towards the end of the year. Even so, the recovery …
16th May 2016
The appointment of well-respected former Finance Minister, Alexei Kudrin, as the Deputy Head of the President’s Economic Council has revived hopes that Russia could be set for a new wave of liberalising reforms. However, while there have undoubtedly been …
The slowdown in GDP growth in Central and South Eastern Europe in Q1 supports our view that the very rapid rates of expansion seen at the end of last year weren’t likely to last. At a country level, the data confirm that Hungary made a very weak start …
13th May 2016
The flash Q1 GDP data for Central and South Eastern Europe (C&SEE) to be released later this week and next week are likely to point to growth of 3-3.5% y/y in most countries. Those rates would be weaker than in Q4, but still respectable. We think Romania …
10th May 2016
The ongoing improvement in Turkey’s current account position in March was encouraging, but once again it was driven mainly by a falling energy import bill. Moreover, as last week’s sell-off in the lira highlighted, the currency remains vulnerable to bouts …
