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The best that can be said about Q1 GDP data from Russia is that the economy has avoided outright collapse and is, instead, merely on the cusp of recession. Although financial market conditions have stabilised in recent months, key vulnerabilities remain …
15th May 2015
First quarter GDP data from Poland and the Czech Republic add to evidence suggesting that, while most other EMs have slowed since the start of this year, those in Central Europe have strengthened. … Czech Republic & Poland GDP …
April’s Polish CPI data, which showed that consumer prices fell by 1.1% y/y compared with a drop of 1.5% y/y in March, should ease lingering concerns that deflation might become entrenched. But today’s data are unlikely to have much impact on monetary …
14th May 2015
We have been warning about the deep-rooted drivers of Turkish inflation for some time, and it now looks like energy prices will compound the problem by pushing the headline rate even further above the central bank’s target. In these circumstances, most …
13th May 2015
The stronger-than-expected preliminary first quarter GDP estimates out of Hungary, Romania and Slovakia are particularly encouraging in light of the slowdown in the German economy. All in all, the data reinforce our view that Central and South Eastern …
Turkey’s higher-than-expected current account deficit figure for March provides further evidence that weak exports have almost entirely offset the benefit to the economy from lower oil prices. And the funding of the deficit remains a concern, with direct …
12th May 2015
The raft of preliminary first quarter GDP data set to be released this week across Emerging Europe should confirm that the Russian economy fell into recession, but that growth in Central Europe was relatively strong, in spite of headwinds from Russia and …
11th May 2015
The stronger-than-expected 4.7% y/y rise in Turkish industrial production in March provides much-needed good news for President Erdogan ahead of next month’s election. But even so, growth in industry over the first quarter as a whole was weak and leading …
8th May 2015
The press release accompanying the Czech National Bank’s MPC meeting, at which the policy rate and the exchange rate ceiling were left unchanged, was dovish but less so than in March. As a result, while we expect monetary conditions to remain very loose, …
7th May 2015
March’s industrial production data from the Czech Republic and Hungary show that both economies ended the first quarter on a strong note. Indeed, these data, put together with the latest retail sales figures, are consistent with GDP growth of more than 3% …
Having left interest rates unchanged earlier today, the Polish MPC struck a dovish note at this afternoon’s press conference in an effort to temper the market’s expectations for interest rate hikes. For our part, we expect the policy rate to remain …
6th May 2015
The fall in Russian inflation last month, to 16.4% y/y, suggests that it has passed its peak. As the effects of last year’s fall in the ruble unwind, we expect inflation to ease gradually over the coming months. That said, it still looks set to remain in …
April’s raft of manufacturing PMIs in Emerging Europe, released today and yesterday, suggest that conditions in the Russian and Turkish industrial sectors improved a little at the start of the second quarter. But activity is still extremely weak. …
5th May 2015
Most of the recent slowdown in inflation across the emerging world has been the result of the weakness in food and fuel inflation. Meanwhile, core inflation is barely any lower than a couple of years ago. This serves as yet another indication of the fact …
29th April 2015
The rise in April’s Economic Sentiment Indicators (ESIs) across most of Central and South Eastern Europe was encouraging, particularly in light of the drop in the corresponding figure for the euro-zone. The breakdown of the surveys provides further …
The region’s two largest economies – Russia and Turkey – have continued to struggle over the past month. Russia’s economy appears to have contracted sharply by around 3% y/y in Q1. Meanwhile, we estimate that growth in Turkey slowed to a sluggish 1.5% y/y …
27th April 2015
The European Commission today charged Gazprom with abusing its dominant position in Eastern Europe’s gas market. In this Update , we answer five key questions about the decision and the implications for both Russia and the rest of Emerging Europe. … The …
22nd April 2015
The Turkish central bank left its official interest rates unchanged today, but managed to make its monetary policy framework even more complex by tweaking a few obscure tools in an effort to release foreign currency liquidity and shore up the lira. The …
The communiqué accompanying today’s decision by the Hungarian National Bank to cut its two-week deposit rate by 15bp, to 1.80%, was very similar to last month’s and clearly indicated that another small rate cut is likely at the next MPC meeting in May. …
21st April 2015
The raft of strong Polish activity data for March was flattered by calendar effects but, even so, the economy clearly ended the first quarter of the year on a strong note. All in all, it looks like GDP grew by a little more than 3% y/y in Q1. … Polish …
20th April 2015
Today’s raft of activity data for March is consistent with Russia’s economy having contracted by around 3% y/y in the first quarter of this year. Although financial markets have rallied over the past few weeks, the weakness of activity data is at odds …
17th April 2015
There is a growing debate in Turkey about what lies behind the strength of inflation, but we think this discussion has overlooked the absence of spare capacity. Without structural reforms to address this, the economy is likely to remain stuck in a rut of …
The most convincing explanation for the recent rally in the ruble is the fact that the strains in Russia’s balance of payments have eased since the start of the year. Nonetheless, they haven’t gone away completely, and the big picture is still that of an …
15th April 2015
Having left the policy interest rate unchanged at 1.5% earlier today, the Polish National Bank’s governor, Marek Belka , dismissed suggestions that the strengthening zloty and March’s weaker-than-expected inflation data might lead to additional rate …
Following a torrid few years after the global financial crisis, Central European consumer spending has started to recover gradually over the last eighteen months and there are reasons to expect this to continue over the coming years. As a result, …
14th April 2015
The decision taken by the Hungarian government to ban Sunday trading is unlikely to have a major impact on the economy at an aggregate level. But as we explain in this Watch , it may lead to a shift in spending patterns. And more importantly, it is likely …
9th April 2015
The small rise in Czech inflation last month, to 0.2% y/y, slightly reduces the probability that the National Bank will ease monetary conditions further at next month’s MPC meeting. Nonetheless, with core inflation at just zero, we continue to think it’s …
The assumptions underpinning Russia’s 2015 budget, currently working its way through parliament, look realistic, suggesting that the government is finally starting to wake up to the extent of the economy’s problems. Nonetheless, a substantial fiscal …
8th April 2015
Turkish financial markets are becoming increasingly worried about what lies in store after June’s parliamentary election, with fears focusing on the risk of rising authoritarianism under President Erdogan and the ruling AK Party. In this Focus , we …
The slump in Russia’s economy has been spreading unevenly across various sectors with consumers bearing the brunt of the economy’s problems. By contrast, the hit to the manufacturing sector has so far been smaller. And we think this trend is likely to …
3rd April 2015
March’s manufacturing PMIs in Emerging Europe were something of a mixed bag, with the figures providing further evidence that the Turkish and Russian economies weakened, although in the latter manufacturers don’t seem to be faring as badly as some had …
2nd April 2015
The Turkish economy grew by a stronger-than-expected 2.6% y/y in Q4, driven by an uptick in consumer spending. But more timely activity data suggest that this improvement was short-lived, with growth slowing to around 1-1.5% y/y in Q1. … Turkey GDP …
1st April 2015
A pick-up in inflation in all four of BRIC economies pushed aggregate EM inflation to an eight-month high last month. However, the bigger picture remains that in most EMs inflation is both low and stable. … BRICs drive pick-up in EM …
31st March 2015
The declines in March’s Economic Sentiment Indicators (ESIs) in Central and South Eastern Europe were disappointing, but the surveys still point to strong growth in the region. Looking at the breakdown of the indicators, there was a welcome improvement in …
Having kept its two-week repo rate unchanged at 0.05% and maintained its exchange rate ceiling of 27/€ earlier today, the Czech MPC’s accompanying statement struck a markedly dovish note. As a result, we are sticking to our forecast that monetary …
26th March 2015
Despite concerns about deflation, a recession in Russia and sluggishness in the euro-zone, the latest data out of Central Europe have been surprisingly robust. Industrial production growth has accelerated in recent months and retail sales are rising at …
25th March 2015
Having resumed its easing cycle earlier today, the Hungarian MPC made it clear that a few more small rate cuts are likely over the coming months. For now, we have pencilled in 30bp of rate cuts, which would bring the benchmark rate to 1.65% by the end of …
24th March 2015
The Polish MPC was uncharacteristically forthright in its statement that today’s 50bp cut in the policyinterest rate, to 1.5%, marked the end of the easing cycle. But it’s clear that weak price pressures willremain a concern for some time to come. As a …
Because Russia’s export gas price seems to follow oil prices with a six to nine month lag, the recent fall in oil prices has not yet fully fed into Russia’s gas export earnings. Admittedly, gas exports are much less important for Russia than exports of …
20th March 2015
Working day effects exacerbated the weakness in February’s activity data from Russia but don’t change the bigger picture of an economy sliding deeper into recession. Consumers are still bearing the brunt of the slowdown, although there are early signs …
19th March 2015
Poland’s industrial production and retail sales data for February suggest that the economy grew by a solid 3% y/y or so last month. As a result, even though the economy fell further into deflation, the MPC seems likely to stick to its pledge to leave …
18th March 2015
The start of debt restructuring negotiations in Ukraine has been accompanied by further losses on the country’s foreign currency government bonds. Meanwhile, currencies in Central Europe have weakened significantly against the dollar over the past month. …
17th March 2015
The Turkish central bank’s decision to leave interest rates on hold today, rather than cut again, was clearly a response to the latest sell-off in the lira, which has forced President Erdogan to tone down his aggressive demands for the MPC to lower rates. …
The weaker-than-expected 1.6% y/y drop in Polish consumer prices last month was driven largely by an even steeper fall in petrol prices. Meanwhile, Czech activity data released today show that the economy started the year on a strong note. … Poland CPI …
13th March 2015
Today’s decision by the Central Bank of Russia to cut its benchmark one-week repo rate by 100bps appears to have been driven by the stabilisation of the ruble over the past month. Barring a renewed fall in the oil price, and hence the ruble, a few more …
It looks all but inevitable that Ukraine will need to restructure its public debts, but there’s a huge amount of uncertainty about what the restructuring might look like. To shed some light, in this Update we answer five key questions about Ukraine’s …
11th March 2015
Turkey’s current account deficit narrowed substantially in January on the back of a fall in imports. But this wasn’t just due to lower energy imports – non-energy imports fell too. This adds to the evidence that economic growth was extremely sluggish at …
The Turkish government’s attacks on the central bank (CBRT) have become increasingly aggressive over the past month, raising fears about the independence of monetary policy and triggering a sharp sell-off in the lira. In this Watch , we explain how the …
10th March 2015
The 2.2% y/y fall in Turkish industrial production in January was distorted a little by base effects, but even so the data highlight the extent to which the economy is struggling. The consensus view that the Turkish economy will grow by over 3% this year …
9th March 2015
Russian inflation continued to accelerate in February, rising to its fastest pace, at 16.7% y/y, in more than a decade. We think inflation is close to peaking, but the big picture is that it’s likely to remain high over the course of this year. As a …
5th March 2015
