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Turkish industrial production data for March indicate that the economy grew at a faster pace in Q1 than in Q4, but that the economy lost momentum towards the end of the quarter. What’s more, the detailed breakdown of the figures show that some of the …
9th May 2016
The Romanian MPC once again sounded relatively hawkish at this afternoon’s press conference, and we remain comfortable with our view that monetary policy will be tightened later this year to take some of the steam out of the recent consumer boom. In …
5th May 2016
The persistent depth of deflation in Poland, particularly when compared with the rest of Central Europe, appears to be due largely to measurement issues, rather than significantly weaker domestic price pressures. The “true” rate of inflation, while weak, …
Reports that Turkey’s Prime Minister, Ahmet Davutoglu, is likely to quit his role amid growing tensions with President Erdogan will reinforce concerns about the shift towards increasingly authoritarian policymaking in the country. It’s still early days, …
The sharper-than-expected decline in Turkish inflation last month, to 6.6% y/y, supports our view that the central bank’s current easing cycle has further to run. However, the fall in the headline rate was driven almost entirely by food inflation, while …
3rd May 2016
The statement by the Russian central bank following its decision to leave the one-week repo rate on hold today was dovish, but less so than what the markets seem to have expected. The Council’s evident ongoing concerns about inflation risks mean we remain …
29th April 2016
This month’s Economic Sentiment Indicators (ESIs) in Emerging Europe were a mixed bag, providing early signs that Poland’s economy strengthened sharply at the start of Q2, while the other Central European economies slowed. Overall, however, the picture …
28th April 2016
The statement accompanying today’s MPC meeting in Hungary was a little more cautious than we had expected, but even so, with inflation likely to stay subdued and growth weakening, we think there’s scope for at least a couple more interest rate cuts in the …
26th April 2016
It’s been a good month for Turkish financial markets. The lira and equities have strengthened. And the surprisingly sharp fall in inflation last month allowed the central bank to ease monetary policy further, helping to bring local currency bond yields …
The effects of sharp falls in EM exchange rates since 2014 – which pushed inflation up to multi-year highs in a number of major economies – are now starting to fade. Assuming there isn’t another big sell-off in currencies, inflation should fall further in …
Some of the gloom surrounding Russia’s economy seems to have lifted over the past month. The rise in oil prices has triggered a rally in local financial markets – the ruble is up by 12% against the dollar since the start of March. And the latest activity …
25th April 2016
The sharp decline in Turkish inflation since January has caught many (ourselves included) by surprise and we think the headline rate is likely to continue to fall over the rest of this year. That means further interest rate cuts are likely in the coming …
21st April 2016
The Russian government’s use of its oil funds to finance the budget deficit will cause the monetary base to expand and is likely to push the banking sector from having a deficit of liquidity to a surplus in the near future. This has raised concerns about …
The Turkish MPC’s 50bp cut in the overnight lending rate today, to 10.0%, was pinned on the recent improvement in inflation (although political pressure no doubt played a role) and with the headline rate likely to edge down further in the coming months, …
20th April 2016
Russia’s activity data for March were weaker than in February, as expected, but the broad trend is still that the slump in the economy is easing. GDP probably contracted by around 2.0% y/y over Q1 as a whole, compared to a fall of 3.8% y/y in Q4. … …
19th April 2016
At first sight, the sharp fall in Ukraine’s current account deficit over the past few years suggests that the economy’s external vulnerabilities have diminished significantly. But that masks the fact that Ukraine’s short-term external debt has risen and …
The disappointing Polish activity data for March suggest that overall GDP growth may have slipped below 3% y/y. However, we don’t think this marks the start of a sharp slowdown; indeed, we expect growth to strengthen in Q2. … Polish Ind. Production & …
There is some evidence that the fall in the lira in the past few years has led to import substitution in parts of Turkey’s manufacturing sector, suggesting that the economy’s competitiveness has improved. However, the gains are not widespread and, in any …
12th April 2016
The resignation of Ukraine’s prime minister on Sunday, coming alongside waning support for the government, will reignite concerns over the future of the country’s frozen IMF programme. While for now at least it looks like a fresh election will be avoided, …
11th April 2016
The decline in Turkey’s current account deficit in February was due almost entirely to lower oil prices, which reduced the energy import bill. We think the deficit is unlikely to improve from here on, but equally it should remain fairly small by recent …
The sharper-than-expected increase in Turkish industrial production in February provides some evidence that local firms are benefiting from a weaker lira. Elsewhere, the decline in Hungary’s inflation rate back into negative territory last month has …
8th April 2016
The Polish MPC made it clear once again at this afternoon’s post-meeting press conference that it’s not likely to loosen monetary policy in the near future. Although inflation will remain subdued, so long as the economy holds up well – as we expect – we …
6th April 2016
Uncertainty regarding who will take over at the helm of the Turkish central bank when the current governor’s term expires this month has raised concerns that a government loyalist could be put in place, resulting in aggressive (and reckless) policy …
5th April 2016
The sharp decline in Turkish inflation in March, to a seven-month low of 7.5% y/y, was driven by a drop in food inflation, and masked the fact that core inflation remains extremely strong. Even so, today’s data make it more likely that the central bank …
4th April 2016
The release of Russian Q4 GDP data today provides further evidence that the worst of the recession is now behind us. And monthly activity data suggest that the slump in activity continued to ease in Q1. … Russia GDP …
1st April 2016
Manufacturing PMIs declined last month in most of Emerging Europe, but overall they continue to paint a picture of a Russian economy that is still struggling and of outperformance in Central Europe. The fact that the Polish PMI rose further supports our …
The Romanian MPC’s press conference this afternoon reinforced our view that concerns about loose fiscal policy will prompt a move towards tighter monetary conditions. This might happen as soon as the next meeting in May. In contrast, the Czech MPC …
31st March 2016
The whopping 5.7% y/y rise in Turkish GDP in Q4 was flattered by working day effects, but even taking this into account the economy remained extremely robust. The strong growth figures coming alongside mounting signs of an inflation problem make the …
The rise in the Economic Sentiment Indicators (ESIs) in most Central and Eastern European economies this month was encouraging and suggests that growth in the region as a whole may turn out to be close to 4% y/y in Q1, up from 3.5% y/y in Q4. … Economic …
30th March 2016
Seasonal factors pushed up food inflation in Asia last month, but the underlying picture is that inflation remains below target in commodity-consuming EMs in Asia as well as in Central Europe. In contrast, the lagged effects of currency weakness continue …
29th March 2016
Financial markets across Emerging Europe have recouped some of their earlier losses this month. The Russian ruble has been the region’s star performer, posting the largest gains among all EM currencies over the past month, helped by rising global oil …
The Turkish central bank’s surprise decision to reduce its overnight lending rate by 25bp to 10.5% today was dressed up as a move to simplify the monetary setup, but it appears to be a result of sustained pressure from the government to lower interest …
24th March 2016
Data released over the past month have provided further evidence that regional growth strengthened at the start to the year. Admittedly, the region’s largest economy, Russia, remains in recession. But the slump in output there is clearly easing. Indeed, …
23rd March 2016
Central and Eastern Europe suffered an unusually deep downturn during the global financial crisis, which led to a large rise in underutilised capital and labour. As demand strengthened, firms could then draw on these resources to raise output. However, …
The weak inflation outlook and prospects for slower growth mean Hungary’s easing cycle, which resumed today, has further to run – we anticipate a few more small rate reductions in the coming months. Meanwhile, the Bank became the first EM central bank to …
22nd March 2016
Capital outflows from Russia have slowed markedly in recent quarters and the nature of these outflows has changed too – they are now driven by Russian companies repaying their external debts, rather than by Russian residents buying foreign assets. But …
The improvement in last month’s Russian activity data was flattered by working day effects due to the leap year. But even so, the figures provide further evidence that the economy has passed the worst. … Russia Activity Data …
21st March 2016
The statement by Russia’s central bank following its decision to leave its one-week repo rate unchanged earlier today was decidedly cautious and reinforces our view that any policy easing is only likely to come towards the end of the year. And even then, …
18th March 2016
The slightly weaker-than-expected Polish inflation figure for last month, of -0.8% y/y, may at the margin make interest rate cuts more likely. However, given the restrained comments from last week’s MPC meeting, we think it would take more than this to …
15th March 2016
We expect the economies of Central Europe (Poland, Hungary, Slovakia and the Czech Republic) to perform well over 2016-17. Consumer spending looks set to stay strong, while export sectors will register reasonable rates of growth. Deflation pressures will …
11th March 2016
Turkey’s balance of payments figures for January showed that the current account deficit continued to narrow, although the pace of improvement slowed. The decline in the external shortfall should provide some support to the lira, which adds weight to our …
10th March 2016
The stronger-than-expected rise in Turkish industrial production in January, of 5.6% y/y, supports our view that the economy is set for another year of robust growth. Nonetheless, the underlying vulnerabilities remain and we continue to be concerned about …
8th March 2016
Hungary’s National Bank has radically reorganised its monetary policy framework over the past couple of years, in the process moving away from interest rate cuts and turning to increasingly unorthodox tools to loosen policy. However, these measures have …
7th March 2016
The divided result in Slovakia’s parliamentary election raises the prospect of a period of political uncertainty and, quite possibly, the need for a second election. However, we don’t think this will have a major impact on the economic outlook which, in …
In theory, at least, Russian manufacturing should be among the biggest beneficiaries from a weaker ruble. However, a weak currency alone is unlikely to trigger an industrial turnaround in Russia. While some sectors of industry look well placed to …
4th March 2016
Poland’s Law and Justice Party has had a whirlwind first few months in power and, in this Watch , we look at the policies introduced so far. The short point is that fiscal measures have been more or less as expected and changes on the MPC have been more …
3rd March 2016
The much weaker-than-expected Turkish inflation figure for February, of 8.8% y/y, adds to reasons to think that the central bank will continue to resist hiking interest rates. But the key point is that price pressures remain extremely strong – indeed, …
Last month’s batch of manufacturing PMIs from Emerging Europe was a mixed bag, but overall the surveys suggest that growth in Central Europe continued to hold up well at the start of this year. … Manufacturing PMIs …
1st March 2016
The decline in this month’s Economic Sentiment Indicators (ESIs) for Central and Eastern Europe was disappointing, but the surveys were still strong and point to GDP growth in the region as a whole of close to 4% y/y . Most of the fall in the ESIs came …
26th February 2016
Sharp falls in currencies pushed up inflation in Emerging Europe and Latin America last year. The impact in Emerging Europe has already started to unwind and we expect the same in Latin America before too long. In Emerging Asia, exchange rate movements …
25th February 2016
