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One factor that has supported growth in Central and Eastern Europe this year is a rise in EU structural funding, but this looks set to ease in 2016. As we explain in this Watch , while this will reduce one prop to investment, we don’t expect it to …
9th December 2015
The much weaker-than-expected rise in Czech consumer prices last month, of just 0.1% y/y, is unlikely to raise fresh concerns about deflation. But even so, it may tip the balance on the MPC in favour of extending their commitment to keeping the exchange …
The pick-up in Turkish industrial production growth in October, coming alongside an uptick in the latest business surveys, suggests that the economy continued to perform strongly in Q4. Elsewhere, although inflation data out of Hungary were a little …
8th December 2015
This report is only available as a PDF. Click to download. … Russia CPI (Nov.) …
4th December 2015
The jump in Turkish inflation to a much higher than expected 8.1% y/y in November reinforces our view that the central bank will be forced to hike interest rates over the coming months. … Turkey CPI …
3rd December 2015
Having contracted in 2015, we expect the economy of Emerging Europe to return to growth in 2016. This will be driven in large part by an improvement in conditions in the region’s largest economy, Russia, which should exit recession over the coming …
1st December 2015
Last month’s manufacturing PMIs for Emerging Europe brought further evidence that the region’s industrial sector strengthened in the final quarter of the year. … Manufacturing PMIs …
The economic impact of the Russian sanctions on Turkey announced this weekend will, in general, probably be limited. Our best estimate of the maximum losses to the Turkish economy is around 0.5% of GDP a year. The tourism sector is likely to be the …
30th November 2015
November’s Economic Sentiment Indicators provided further evidence that Central and Eastern Europe’s recent strong performance continued into the final quarter of the year. The surveys suggest that regional GDP growth could have picked up to around 4.0% …
27th November 2015
The raft of preliminary GDP data published over the past month showed that the slump in regional growth bottomed out in the third quarter of this year. We estimate that, in aggregate, GDP in Emerging Europe contracted by 0.5% y/y, a better outturn than …
26th November 2015
Although aggregate EM inflation edged down in October, the number of EM economies that recorded a rise in inflation last month exceeded those where it fell. We expect this trend to continue in 2016. … Inflation now rising in more EMs than it is …
The Turkish central bank left interest rates on hold today, but given the economy’s exposure to Fed tightening and with inflation set to rise even further, rate hikes look likely over the coming months. … Rate hikes looming in …
24th November 2015
The Turkish lira and stock market jumped in the immediate aftermath of the country’s election at the start of the month, which lifted the political uncertainty that had weighed on investors since June. But the markets have reacted badly to the …
23rd November 2015
Despite a sharp fall in energy revenues, there is no imminent risk of a fiscal crisis in Russia. Accordingly, we don’t share the view that the government needs to tighten policy immediately; indeed, there is merit in keeping policy support in place given …
18th November 2015
Today’s flash Q3 GDP data confirmed that the Central and South Eastern European economies continued to grow robustly, despite fears of a widespread EM slowdown. Indeed, this year is shaping up to be the strongest for the region since 2008. … Central & …
13th November 2015
Turkey’s monthly current account balance rose a little further into surplus in September, but this was mainly due to lower energy imports and an improvement in the gold trade balance. The underlying performance of exports remained poor and there are signs …
11th November 2015
The slowdown in Turkish industry in September means that industrial production growth over Q3 as a whole was a little slower than in Q2. Elsewhere, the weaker-than-expected inflation data from the Czech Republic in October mean that the MPC is set to …
9th November 2015
Last month’s Polish election heralds a shift towards more populist policymaking under Law and Justice (PiS). In this Watch , we look at which areas are most likely to see a shift in policy and what the economic impact might be. The short point is that …
6th November 2015
The press conference following the Romanian MPC meeting earlier today confirmed our view that the resignation of the Prime Minister yesterday would prompt the Council to adopt a more cautious line. Nonetheless, we don’t think the outlook for interest …
5th November 2015
Russian inflation edged down again in October, to 15.6% y/y, but the headline rate remains extremely high and this figure alone is unlikely to be enough to tip the balance on the MPC in favour of a rate cut. … Russia CPI …
On the face of it, the fall in Turkish inflation last month to a weaker-than-expected 7.6% y/y looks encouraging. However, this masks the fact that core inflation rose to its highest rate in almost a year. With the headline rate likely to rise again, we …
3rd November 2015
The larger-than-expected 0.8% y/y fall in Polish consumer prices last month is likely to reinforce the MPC’s dovish stance. And interest rate cuts could come back onto the agenda, particularly if the newly-elected Law and Justice government nominates a …
2nd November 2015
The Turkish lira and stock market have rallied following Sunday’s election results, which delivered the ‘Goldilocks’ scenario of a small AK party majority in parliament. This has alleviated concerns about further political uncertainty, but it remains to …
Manufacturing PMI surveys for October showed that industry across Emerging Europe started Q4 on a strong note. The improvement in Poland was particularly encouraging, and Central Europe in general appears to have held up relatively well. Meanwhile, the …
Opinion polls suggest that Sunday’s parliamentary election in Turkey will deliver another hung parliament, and immediate attention is likely to concentrate on the likelihood of a coalition being formed. But our sense is that investors should pay more …
30th October 2015
The Russian central bank kept its benchmark interest rate on hold today, but there was a clear shift in tone in the accompanying statement, suggesting that the MPC plans to resume the easing cycle once inflation starts to fall back. The next rate meeting …
Although aggregate EM inflation slowed slightly in September, it is set to rise in the months ahead as the drag from last year’s slump in oil prices fades. … EM inflation to rebound …
This month’s Economic Sentiment Indicators for Central and Eastern Europe were encouraging – our regional aggregate rose to its highest level since September 2008. Admittedly, there were some tentative signs that the VW emissions scandal may have hit …
29th October 2015
Central Europe has been a rare bright spot in the emerging world over the past few quarters, but recent developments have taken some of the gloss off. Activity and survey data for August and September were notably softer, mirroring some of the figures …
28th October 2015
Exit polls suggest that the opposition Law and Justice won a convincing victory in yesterday’s Polish parliamentary election, which is likely to cement concerns about a shift towards more populist policymaking. There’s a lot of uncertainty about what Law …
26th October 2015
Currencies, equities and bonds in the region’s two largest economies – Russia and Turkey – have posted gains over the past month as oil prices have stabilised and expectations for US rate hikes have been pushed back. Elsewhere, the Polish zloty has lost …
22nd October 2015
The Turkish MPC left its key interest rates unchanged today, but the accompanying press release suggests that the Council may finally have recognised that inflation is set to rise further. This reinforces our view that the Bank will tighten monetary …
21st October 2015
The National Bank of Hungary’s MPC kept its policy interest rate unchanged at 1.35% earlier today, but the Council used the accompanying press release to commit to keeping interest rates on hold at their current historic low into 2017. This is in line …
20th October 2015
September’s activity data from Russia suggest that while the downturn in industry seems to have bottomed out, the slump in consumer spending has deepened. Retail sales are now falling at their sharpest pace since 1999. … Russia Retail Sales, Inv. & IP …
19th October 2015
Rising support for the opposition Law and Justice party ahead of Poland’s parliamentary election on 25th October has raised concerns about a move towards more populist policymaking. We think that any impact on the economy’s near-term outlook from such a …
16th October 2015
Turkey’s balance of payments data for August were, on the face of it, encouraging as the current account deficit fell to its lowest monthly level since 2009. But it’s worth noting that the decline in the external shortfall was driven by a drop in …
14th October 2015
Czech inflation came in at a slightly stronger-than-expected 0.4% y/y last month, as an easing of the decline in food prices more than offset a steeper decline in fuel prices. The bigger picture, however, is that inflation remains subdued and is likely to …
9th October 2015
The IMF has put the vulnerabilities in the Turkish banking sector – which we have been warning about for several years – back into the spotlight. So far, there have been remarkably few signs of stress in the sector. But given the scale and structure of …
8th October 2015
The larger-than-expected rise in Turkish industrial production in August was encouraging, although given the more recent declines in business confidence, it’s not clear whether this will be sustained. Elsewhere, the sharper-than-expected decline in …
Having left the policy interest rate on hold at 1.5% earlier today, the Polish MPC sounded relatively cautious about the downside risks to the inflation outlook. The Council doesn’t seem to be in the mood to lower interest rates – and the markets may have …
6th October 2015
The small decline in Russian inflation last month, to 15.7% y/y, was reassuring in light of the fresh fall in the ruble. But even so, inflation remains extremely high and against this backdrop there is little room for the central bank to lower interest …
5th October 2015
The rise in Turkish inflation to a stronger-than-expected 7.9% y/y last month provides further evidence that the latest plunge in the lira is hurting the economy. This reinforces our view that the central bank will tighten monetary conditions over the …
The Volkswagen (VW) emissions scandal has led to growing concerns in Central Europe that, because of the company’s large presence in the region, there could be a heavy economic toll. However, as we explain in this Watch , while there may be a near-term …
2nd October 2015
The fall in the ruble has led to a sharp increase in the foreign currency debt burden for Russian companies. The risks are mitigated to some extent by the fact that the debt is concentrated among large public companies which, given their importance, are …
Last month’s manufacturing PMIs for Emerging Europe brought mixed news. Activity in Central Europe appears to have held up reasonably well, and the surveys suggest that the slump in the Russian economy has bottomed out. But the PMIs provide further …
1st October 2015
Having left interest rates unchanged earlier today, the Romanian MPC once again used the accompanying press conference to warn that looser fiscal policy could lead to stronger inflation pressures. But it’s clear that the Council will wait for more …
30th September 2015
Ukraine’s debt-restructuring deal has led to a rally in the country’s bond market and eased pressure on the hryvnia . Meanwhile, although most of the region’s equity markets have fallen over the past month, they have avoided the large losses seen in …
29th September 2015
The declines in this month’s Economic Sentiment Indicators across much of Central and Eastern Europe were disappointing, particularly in light of the relatively impressive reading from Germany. But overall the surveys still point to strong regional GDP …
While inflation in the EM world is low on average, there are big divergences. In particular, many of the economies already struggling with high inflation are also those that have seen their currencies fall sharply recently, which suggests their inflation …
28th September 2015
There are few signs that Europe’s migrant crisis has had much economic impact on Central Eastern Europe (CEE). However, if recent border controls were to become a permanent fixture, the region could be affected via disruptions to manufacturing supply …
