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Credit conditions in Russia have tightened substantially over the past six months or so, with households and SMEs being particularly hard hit. We don’t expect a significant turnaround anytime soon. Non-performing loans are set to rise further over the …
25th September 2015
Having left monetary policy unchanged earlier today, the Czech MPC struck a dovish note at this afternoon’s press conference, although it looks like the strength of the latest economic data prevented this rhetoric from being matched with action. We expect …
24th September 2015
Emerging Europe remains a region of two halves. Its two largest economies – Russia and Turkey – will continue to struggle over the coming years as cyclical downturns compound long-standing structural problems. Our forecasts for both economies are below …
23rd September 2015
The Russian ruble and Turkish lira have been among the hardest hit EM currencies this quarter and this has already started to feed through into the real economy. Inflation is on the rise (again), extending the squeeze on consumers. And central banks have …
22nd September 2015
The Turkish central bank left its official interest rates on hold today, but tweaks to its policy framework and to the accompanying statement suggest that the MPC is (slowly) taking a more hawkish line. Last week’s decision by the Fed to stand pat …
Rosstat’s monthly raft of activity data showed that the Russian economy continued to contract in August at a pace of around 4.5-5.0% y/y. However, the figures provide the first signs that the pace at which output is falling may have started to ease. … …
17th September 2015
August’s Polish activity data were generally a little weaker-than-expected, but even so it looks like the economy continued to grow at a robust pace of around 3.5% y/y in Q3. At the margin, these data may temper the views of the one or two hawks on the …
Deflation in Poland eased a little last month as a fall in energy inflation was more than offset by strengthening food inflation. We expect the headline rate to return to positive territory in the final quarter of the year, as the impact of last year’s …
15th September 2015
Today’s decision by the Russian central bank to keep interest rates on hold at 11.00% having cut rates at each of its previous meetings this year, clearly reflects policymakers’ concerns about the recent weakness of the ruble and the impact this will have …
11th September 2015
The sharp pick-up in Turkish GDP growth in Q2, to 3.8% y/y, provides some rare good news for the economy. However, we think this is likely to be temporary and higher inflation and tighter monetary policy will cause growth to weaken again over the coming …
10th September 2015
With the Russian economy in a deep recession, the fact that the unemployment rate has remained at historic lows is puzzling. As we explain in this Watch , one explanation may be that large firms – which are by far the biggest employers in Russia – have …
9th September 2015
The fall in Czech inflation in August, to 0.3% y/y, was driven largely by steeper falls in food and energy prices and, as a result, shouldn’t raise too many concerns about the risk of deflation. Nonetheless, today’s CPI figure adds to the reasons to think …
The sharper-than-expected slowdown in Turkish industrial production in July, coming alongside the fall in August’s manufacturing PMI, reinforces our view that GDP growth is likely to weaken in the coming quarters. Elsewhere, the fall in inflation in …
8th September 2015
The rise in Russian inflation in August, to 15.8% y/y, seems to have been driven by the impact of the fall in the ruble. Against this backdrop, the central bank looks likely to keep its benchmark one-week repo rate unchanged at 11.0% next week. … Russia …
4th September 2015
The rise in Turkish inflation, to 7.1% y/y last month, provided the first hard evidence that the latest fall in the lira has started to push up price pressures. We expect inflation to rise further over the next six months and, against this backdrop, it …
3rd September 2015
Having left its benchmark interest rate unchanged at 1.50% earlier today, the Polish MPC struck a relatively dovish note at the post-meeting press conference, reinforcing our view that monetary policy is likely to remain loose for longer than most expect. …
2nd September 2015
August’s manufacturing PMIs for Emerging Europe were generally weak, with almost all the headline figures dropping from July. The decline in the Polish survey was the most disappointing of the lot, but we would note that the sharp fall in this PMI stands …
1st September 2015
The recent bout of currency weakness is likely to add to inflation concerns in EMs that have either seen their currencies fall a long way or have limited spare capacity in their economies (mainly Latin America but also Turkey). However, in EMs where …
31st August 2015
Economic Sentiment Indicators strengthened in most countries across Emerging Europe this month, suggesting that the region continued to grow at a healthy pace in the third quarter. … Economic Sentiment Indicators …
28th August 2015
Following months of difficult negotiations Ukraine has finally managed to agree on a debt restructuring deal with its creditors. But the deal itself is too small to make much of a dent in Ukraine’s debt-to-GDP ratio. What Ukraine really needs in order to …
27th August 2015
Central European bonds and currencies have been remarkably resilient during the recent turmoil in the global financial markets. In contrast, Turkish markets have been hit by fresh concerns about the political situation and a general spike in investor risk …
25th August 2015
The latest plunge in global oil prices and the associated depreciation of the ruble have added to what was already a bleak picture for the Russian economy and reinforce our view that this year’s recession will be deeper than most expect. … What does the …
24th August 2015
The raft of Russian activity data for July, released today, showed that the economy continued to contract by 4-5% y/y at the start of Q3. And the latest drop in oil prices means that the fall in output in Q3 as a whole is likely to be just as deep as in …
19th August 2015
The raft of Polish activity data for July were slightly disappointing, but we don’t think this marks the start of a more serious downturn. Indeed, it still looks like the economy was growing by around 3% y/y at the start of the third quarter. … Polish …
The Turkish central bank (CBRT) kept its benchmark rates on hold today, but the accompanying statement struck a hawkish note in response to the latest fall in the lira. In addition, the Bank’s accompanying publication of its road map for monetary policy …
18th August 2015
Flash Q2 GDP data from Central and South Eastern Europe serve as a reminder that it’s not all doom and gloom for the emerging world. GDP in the region as a whole grew by a robust 3.5% y/y. The Czech Republic was the region’s star performer, and is now one …
14th August 2015
Markets have reacted negatively to news that coalition negotiations between the two largest parties in Turkey have broken down and that fresh elections are now highly likely. While we don’t think things are that bad – indeed, the very latest fall in the …
13th August 2015
The Polish economy remained in deflation in July, with consumer prices falling by 0.7% y/y, and the latest drop in oil prices may have pushed inflation deeper into negative territory this month. Even so, we don’t think policymakers will be overly …
Turkey’s current account deficit narrowed in dollar terms in June, but only because imports dropped by more than exports. Moreover, the financing of the deficit remains a source of vulnerability. Elsewhere, although inflation in Hungary came in at a …
11th August 2015
Russia’s recession deepened in Q2 of this year and with oil prices having since taken another leg down, the economic prospects for the coming quarters look pretty grim too. Industry appears to have been a major cause behind the deterioration in Q2, having …
10th August 2015
The raft of preliminary second quarter GDP data due to be released this week in Emerging Europe is likely to show that the recession in Russia deepened, but that growth in Central and South Eastern Europe remained surprisingly strong. … Q2 GDP data to …
The weaker-than-expected 0.5% y/y rise in Czech consumer prices last month may bethe first sign that the recent appreciation of the koruna is starting to drag downinflation. Even so, with the economy growing strongly and the impact from the fall inoil …
The faster-than-expected expansion in Turkish industrial production, of 5.5% y/y, in June was, in part, due to a rebound in the auto sector following strikes in May. But overall, this figure adds to the evidence that GDP growth in Q2 was stronger than in …
7th August 2015
The Czech MPC kept its policy interest rate and exchange rate ceiling unchanged earlier today, but the Council dropped its strongest hint yet in the accompanying press release that extremely loose monetary conditions will stay in place into 2017. This …
6th August 2015
Russian inflation picked up in July for the first time since March, but this was driven entirely by last month’s hikes in household utility tariffs. In contrast, core price pressures eased. Inflation should fall back early next year as the effects of the …
4th August 2015
Having left its policy interest rate on hold at 1.75% earlier today, the Romanian MPC used this afternoon’s press conference to suggest that the government’s plans to loosen fiscal policy raise the likelihood of interest rate hikes. For our part, though, …
The weakness of Turkish exports over the first half of this year can in part be pinned on temporary factors including bad weather, strikes in the automobile sector and problems in major trading partners. However, as we explain in this Focus , there is …
3rd August 2015
Last month’s PMIs for Emerging Europe suggest that the escalation of the Greek crisis had little impact on manufacturing in Central Europe. Meanwhile, there was good news from Turkey as the PMI ticked up, while last month’s CPI data showed that inflation …
The Russian central bank (CBR) cut its one-week repo rate by 50bp, to 11.0%, today, but the recent fall in the ruble triggered a clear shift in the Council’s tone, and policymakers are no longer committing themselves to lowering interest rates further. …
31st July 2015
Comments from Turkish central bank (CBRT) Governor Erdem Basci earlier today that the Bank is planning to move away from using its complex interest rate “corridor” and towards the use of a single policy rate should be welcomed as this would help to …
30th July 2015
The falls in July’s Economic Sentiment Indicators across much of Emerging Europe were disappointing in light of the rise in the German survey. But even so, the figures are still consistent with strong GDP growth of close to 4% y/y in the region at the …
The move by Russia’s central bank to halt its foreign currency purchases suggests that policymakers have become increasingly concerned by the recent slump in the ruble. But even so, the impact on both inflation and foreign currency debt from the ruble’s …
29th July 2015
The latest fall in global oil prices will not be enough to prevent a rise in EM inflation later this year. It is, however, another reason to think the rebound in inflation will be relatively benign, and that most EM central banks will be able to take a …
28th July 2015
Fears about a near-term and potentially messy default by Ukraine eased a little this month, providing some respite for the country’s sovereign dollar debt. But even so, some form of default still seems more likely than not. Meanwhile, equities and …
27th July 2015
Greece’s move towards a third bailout has brought relief to Central and South Eastern Europe where concerns about contagion were very real, particularly in the Balkans. While it is too early to say whether there has been a hit to consumer and business …
24th July 2015
The strength of the Czech koruna has raised concerns at the National Bank about a fresh slowdown in inflation and, in the first instance, we think the MPC will try to ease pressure on the currency by pledging to keep monetary policy loose for longer. …
23rd July 2015
The statement accompanying today’s Turkish central bank decision, at which interest rates were lef tunchanged, made it clear that the MPC isn’t reading too much into June’s much sharper-than-expected fall in inflation (and rightly so). We think inflation …
Recent concerns that Russia’s central bank is abandoning the ruble free float seem overdone. While policymakers will undoubtedly keep a close eye on the ruble and intervene on the FX market in order to smooth out fluctuations, we don’t think this means a …
22nd July 2015
Having cut its two-week deposit rate by a slightly larger-than-expected 15bp to 1.35% earlier today, the Hungarian MPC made it clear that no further rate cuts were likely. But at the same time, the Council pledged to keep interest rates on hold “for a …
21st July 2015
Russia’s activity data for June made for grim reading. The hit to consumer-facing sectors has been particularly severe, but industry has struggled too. We estimate that GDP contracted by around 5% y/y in Q2. In contrast, activity data for Poland, also …
17th July 2015
