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The weakness of Turkish industrial production in November, which grew by just 0.7% y/y and fell by 0.1% over the month, provides an early sign that GDP may have contracted over the quarter. In contrast, growth in Hungary’s industrial sector picked up …
8th January 2015
The National Bank of Romania’s Governor, Mugur Isarescu , struck a dovish note at this afternoon’s press conference, which suggests that the interest rate cut earlier today to a fresh record low of 2.50% is unlikely to be the last in the easing cycle. …
7th January 2015
2014 was the year that political risk returned to Emerging Europe and the political and economic fallout from the Russia-Ukraine crisis is likely to reverberate this year too. But we think there are three other political risks that investors need to keep …
6th January 2015
The sharp fall in Turkish inflation last month, to 8.2% y/y from 9.2% y/y, was an encouraging development, but core inflation remained extremely high. Elsewhere, December’s batch of manufacturing PMI data provided the first sign that Russia’s currency …
5th January 2015
The Russian ruble has stabilised in recent days, but only after the central bank introduced a raft of measures to limit ruble liquidity – including a massive hike in interest rates – and, perhaps more importantly, oil prices started to edge up. The …
22nd December 2014
Although the recent drop in oil prices will continue to exert downward pressure on inflation in most parts of the emerging world, it won’t provide a lasting solution for the economies with high, deeply embedded inflation problems. As a result, …
19th December 2014
The Russian ruble has rallied over the past 24 hours, but there are growing signs that the crisis is spreading to the banking sector. In particular, interbank interest rates have jumped to over 27%, which is well above the cost of central bank liquidity …
The mounting economic crisis in Russia meant that there has been greater-than-usual focus on President Putin’s annual press conference, which is taking place this morning. In this Update we provide our instant reaction to the key points that have been …
18th December 2014
There are more differences than similarities between the current crisis in Russia and the crisis in 1998, but one point in common is that both have their roots in severe strains in the country’s balance of payments. In this sense, the lesson from 1998 is …
The Central Bank of Russia has this afternoon announced a raft of measures that, while on their own aresmall, collectively suggest that the authorities have at last started to develop a strategy for containing theeffects of the ruble’s collapse on the …
17th December 2014
The ruble crisis has sparked fears of contagion to Russia’s financial sector and a meltdown in the economy. A rise in interbank interest rates tends to be best indicator of stress in the banking sector. These have jumped in recent days but, unlike in …
The raft of activity data from Russia for November contains some signs that investment has started to weaken but in general the picture is still of an economy that is stagnating rather than collapsing. The key point however is that that these data predate …
The crisis in Russia, coming alongside renewed weakness in the euro-zone, adds to the headwinds facing Central and Eastern Europe (CEE). Thankfully, the threat of potentially explosive financial contagion from the crisis in Russia looks limited. But the …
16th December 2014
Last night’s emergency interest rate hike in Russia has raised more questions that it has provided answers. Part of the renewed pressure on the ruble today stems from oil prices, which have fallen again this morning. But more fundamental concerns are …
The renewed sharp falls in the ruble today will fuel speculation that the authorities could resort to increasingly unorthodox measures to help stabilise the currency, including capital controls. But while we would not rule out the possibility that the …
15th December 2014
On the face of it, November’s Polish CPI data, which showed that the economy remained in deflation, argue in favour of additional interest rate cuts. But we’re not convinced that these figures will sway some of the more hawkish MPC members. … Poland …
The ruble has continued to fall in spite of the rise in Russian interest rates, raising speculation that capital controls may be introduced. While we wouldn’t rule these out, we still think they are likely to be a measure of last resort. Elsewhere, the …
12th December 2014
The 100bp hike in Russian interest rates today was the minimum the central bank (CBR) had to deliver given the recent slide in the ruble . With the ruble likely to remain under pressure and inflation set to rise further over the coming months, we think …
11th December 2014
Turkey’s current account deficit continued to decline in October and the fall in oil prices means it should narrow even further, towards 5% of GDP, over the coming months. Meanwhile, Hungary’s CPI data for November showed that the recent slump in oil …
Today’s weaker-than-expected Turkish Q3 GDP data highlighted that domestic demand remained extremely sluggish and are likely to result in further government pressure on the central bank to lower interest rates. But extremely high inflation means a …
10th December 2014
Ukraine’s deepening recession and the slide in the central bank’s FX reserves have raised fresh questions about whether the government will default on its debt. On the economics alone, we think default looks almost inevitable. But the picture is …
8th December 2014
The modest weakening of Turkish industrial production in October reinforces our view that, while the slowdown in the economy has now bottomed out, it’s likely to be a sluggish recovery from here on. Elsewhere, data from the Czech Republic suggest that …
Russian inflation accelerated sharply to 9.1% y/y in November and, with the ruble falling further over the past few weeks, it is on course to continue rising over the coming months. We think that Russian inflation will peak at around 11% by the middle …
4th December 2014
Comments from Turkey’s Finance Minister, Mehmet Simsek , that the sharp fall in oil prices will remove the economy’s status as one of the most fragile in the emerging world have some basis. The current account deficit is likely to narrow, and both …
The government budget for 2015, that was signed by President Putin today, is based on a range of outdated assumptions. Based on current spending plans, we reckon the government is likely to run a budget deficit of 2.0% of GDP in 2015 rather than 0.6% of …
3rd December 2014
The accompanying statement to today’s Polish MPC meeting, at which interest rates were left unchanged, struck a dovish note. But it also stressed that the strength of the economy had eased policymakers’ concerns about deflation. And it emphasised that it …
The rise in Turkish inflation to 9.2% y/y in November, which came in spite of the sharp drop in oil prices, underlines the strength of underlying price pressures in the economy. Given this, it’s difficult to see the central bank lowering interest rates …
The sharp fall in the ruble over the past few days points to another large increase in interest rates when the central bank’s board meets next week. But the fact that the authorities have so far resisted intervening in the foreign exchange market suggests …
1st December 2014
The across-the-board rise in last month’s manufacturing PMIs in Emerging Europe provide further evidence that, in spite of continued weakness in the euro-zone, the region’s economies are ending the year on a strong note. … Manufacturing PMIs …
November’s Economic Sentiment Indicators provide further evidence that, in spite of continued weakness in the euro-zone, growth in Central and Eastern Europe has picked up in Q4. The breakdown of the surveys suggests that strengthening domestic demand is …
27th November 2014
Following sharp falls in commodity prices, concerns have started to mount that parts of the emerging world are about to slip into a damaging period of deflation. Although we think that inflation is set to remain extremely weak for some time to come, …
A combination of interest rate hikes, a move towards a fully floating ruble and steps to limit the provision of ruble liquidity appear to have arrested the slump in Russia’s currency. Elsewhere, the deepening economic crisis in Ukraine has led to a …
26th November 2014
The National Bank of Hungary left interest rates unchanged today and, in spite of negative inflation, the MPC appears to be in no mood to resume policy easing. But equally, there will be little pressure to raise interest rates and we expect monetary …
25th November 2014
Aggressive hikes in interest rates coupled with the central bank’s decision to accelerate the move towards a fully floating currency have helped to stabilise the Russian ruble over the past week. But while the authorities have managed to take some of …
24th November 2014
Russian activity data for last month suggest that the economy withstood the initial sharp drop in the price of oil better than some had feared. But even so, the big picture is that growth is still extremely sluggish at around 0.5% y/y. … Russia Retail …
21st November 2014
One of the most striking aspects of the recent slowdown in the Russian economy is that the previously resilient consumer sector has weakened sharply. And while this may in part be a result of spillovers from the Ukraine crisis, we think there are more …
The slowdown in Polish industrial production growth in October was disappointing and contradicts the improvement in the survey data for that month. However, it seems unlikely that these data will shift the balance on the MPC back in favour of further …
20th November 2014
The accompanying statement to today’s Turkish MPC meeting, at which interest rates were left unchanged, once again suggested that the Council remains concerned about the poor inflation outlook. This is likely to dash hopes that have been growing in the …
The recent fall in oil prices, coupled with the drop in the ruble, has revived memories of 1998 in Russia, when similar developments culminated in a government debt default. The state of Russia’s public finances has improved dramatically since then, …
18th November 2014
Third quarter GDP data for Central and Eastern Europe were surprisingly strong given the headwinds facing the region from Russia and, in particular, the euro-zone. … Central & Eastern Europe GDP …
14th November 2014
Russia’s economy performed better than even we had expected in Q3, but this predates the most recent slump in oil prices. We still expect the economy to slip into recession next year. Elsewhere, Poland slipped further into deflation last month, while …
13th November 2014
Growth across Emerging Europe has slowed in recent months and we expect it to remain soft over the coming quarters. The economies of Central Europe will continue to be held back by weakness in Germany, but a further sharp fall in growth from here seems …
12th November 2014
The raft of preliminary Q3 GDP data due to be published this month is likely to be disappointing, showing a slowdown in growth across the region. While domestic demand seems to have held up reasonably well, most of the slowdown appears to have been due to …
11th November 2014
There are relatively few parallels between the 1998 ruble crisis and the present crisis, but one point in common is that some of the greatest vulnerabilities to a weaker currency lie in the banking sector. This is the place to watch for signs that a …
10th November 2014
The continued slide in the ruble is likely to force the Central Bank of Russia into making a one-off intervention in the currency market, permitted under its new exchange rate policy, rather more quickly than it had initially hoped. It is also likely to …
7th November 2014
The fall of the Berlin Wall marked the start of the transition from central planning to market-based economies in Central and Eastern Europe, which in turn paved the way for a sharp rise in prosperity. But 25 years on, concerns are rising that income …
6th November 2014
Following the surprise decision to leave interest rates on hold today, when most had expected a 25bp cut, Governor Belka didn’t close the door on further easing. But he did shift the emphasis onto growth, rather than inflation, as the trigger for a …
5th November 2014
Russian inflation accelerated to a three-year high of 8.3% y/y in October and, with the lagged effects of a weaker ruble still to come through, a further rise towards 9% y/y is likely over the coming months. … Russia Consumer Price Inflation …
Having cut its policy interest rate by 25bp to 2.75% earlier today, the Romanian MPC didn’t give much away about the outlook for monetary policy at the post-meeting press conference. Nonetheless, policymakers appear to be increasingly dovish on the …
4th November 2014
Last month’s manufacturing PMIs for Central Europe provide further evidence that, having slowed in Q3, the region started Q4 on a stronger note. … Manufacturing PMIs …
3rd November 2014
