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Russia’s central bank had to deliver two things at today’s Board meeting in order to stem the slide in the ruble : an aggressive hike in interest rates and an immediate overhaul of the current exchange rate “corridor” policy. It delivered on the first, …
31st October 2014
Victor Ponta looks set to win the presidential election in Romania on Sunday at a time when the economy is being buffeted by renewed weakness in key euro-zone trading partners. The economic outlook from here on will hinge in part on external developments …
30th October 2014
The Russian ruble has rallied by around 3% against the dollar today seemingly as a result of central bank intervention on the foreign exchange market … Ruble crisis pushes central bank towards heavy FX …
The sharp fall in oil prices over the past couple of months will keep inflation across Central and South Eastern Europe extremely weak and could push several economies deeper into deflation . Nonetheless, in contrast to parts of the euro-zone, for most …
29th October 2014
The press release accompanying today’s decision by the National Bank of Hungary to keep interest rates on hold was surprisingly upbeat. It largely shrugged off the drop in inflation in September, signs that growth has slowed and renewed weakness in key …
28th October 2014
The continued slide in the ruble over the past few weeks has raised the prospect that Russia is in the grip of a self-fulfilling currency crisis in which the mere anticipation of currency weakness spurs further capital outflows and pushes the ruble …
The victory of pro-Western, reformist parties in yesterday’s election was perhaps the best that could have been hoped for. But with the economy in freefall and the conflict in the east of the country still simmering, their work will be cut out. … Ukraine: …
27th October 2014
The past month has brought further evidence of weaker growth in Central Europe. Admittedly, August’s particularly disappointing data appear to have been distorted by variations in summer holidays. And the early data we have for September suggest that …
24th October 2014
Inflation eased further in September across most of the emerging world, in aggregate reaching its lowest rate in nearly five years. Falling commodity prices and weak underlying price pressures mean that inflation is likely to remain subdued over the …
23rd October 2014
The accompanying statement to today’s Turkish MPC meeting, at which interest rates were left on hold, is likely to quash hopes that have been growing in some quarters for looser policy in response to weaker growth and the fall in oil prices. For our part, …
Our GDP Tracker suggests that growth in the Polish economy slowed to around 2.5% y/y in Q3 from 3.2% y/y in Q2. But it does at least look like the economy strengthened a touch towards the end of the third quarter and early signs suggest that growth may …
The recent fall in the oil price has underlined the perils of Russia’s over-reliance on its energy sector and the corresponding need to develop non-energy sources of growth. Part of the route back to economic vigour is an increase in Russia’s overall …
22nd October 2014
The fall in oil prices over the past month or so poses another headwind for Russia’s struggling economy. The drop in prices so far is unlikely to have a major bearing on the immediate outlook – although it does limit the scope for major fiscal stimulus to …
20th October 2014
The pick-up in Russian activity data in September, while encouraging, may owe more to working day effects than to an underlying improvement in growth. The bigger picture is still one of an economy that is essentially stagnating. … Russian activity data …
17th October 2014
Of all the reasons to expect softer growth in Central and Eastern Europe, the weakness of the German economy is by far the most compelling. Indeed, we estimate that it accounts for the bulk of the slowdown in regional growth over the past six months. … …
16th October 2014
Lending conditions in Russia have tightened in recent months, but there is no sign yet that Western sanctions have led to a sharp drop in bank lending to the wider economy or a credit crunch on the scale of that experienced in 2008. That being said, with …
13th October 2014
Turkey’s recently-published 2015-17 Medium-Term Programme shows that the government remains overly-optimistic on the economy’s growth prospects and still hasn’t acknowledged the strength of underlying price pressures. For our part, we think the next few …
9th October 2014
The fallout from the crisis in Ukraine and the subsequent sanctions imposed by Western governments have certainly contributed to the recent weakness of Russia’s economy. But there are ominous signs – particularly from developments in the labour market – …
Following a larger-than-expected interest rate cut in Poland earlier today, Governor Belka understandably maintained an extremely dovish stance at this afternoon’s post-meeting press conference. At the same time, however, he suggested that today’s move …
8th October 2014
The steep fall in the ruble over the past month will affect different parts of the economy in different ways. The government is likely to be one of the major winners. By contrast, consumers are likely to lose out, as are corporates with large external …
7th October 2014
The rise in the Turkish lira today has brought some respite to the beleaguered currency. And with the central bank now tightening monetary conditions, we wouldn’t be surprised to see a modest rally in the very near-term. But the bigger picture is that the …
2nd October 2014
September’s PMIs suggest that the slowdown in the region’s manufacturing sector may have stabilised towards the end of the third quarter. Encouragingly, the Polish PMI edged up, having fallen for the previous six consecutive months. But the decline in the …
1st October 2014
The sharp sell-off in the Russian ruble and Turkish lira this month couldn’t have come at a worse time for policymakers. Growth is sluggish in both countries, but high inflation and concerns about financial stability mean that monetary policy will need …
30th September 2014
The National Bank of Romania’s rate cut earlier today probably marks the end of the recent easing cycle. After all, forthcoming data are likely to show inflation rising to within the Bank’s tolerance range. But the bigger picture is that monetary policy …
The impact of Western sanctions, a slowdown in the previously resilient consumer sector and, perhaps most importantly, increasingly statist policymaking have led us to revise down our forecasts for Russian GDP growth over the next couple of years. We now …
29th September 2014
There has been a broad-based sell-off in Emerging European markets over the past month, but those in Turkey have suffered some of the heaviest losses as a renewed focus on Fed tightening has brought the country’s external vulnerabilities back into the …
26th September 2014
The Turkish central bank kept its key interest rates unchanged today, but there are signs that policymakers have started to tighten monetary conditions via the interest rate “corridor” to counter the recent sell-off in the lira. High inflation and a large …
25th September 2014
The National Bank of Hungary’s post-meeting press release reinforced the message that the MPC sees little pressure to raise interest rates. Indeed, with inflation likely to remain low, and economic growth set to weaken over the coming quarters, we don’t …
23rd September 2014
Recent falls in the prices of oil and a number of agricultural commodities add to the reasons to expect EM inflation to stay muted over the coming months. But while in aggregate we think that inflation across the emerging world will remain relatively …
So far at least, the crisis in Ukraine doesn’t seem to have had much of an impact on overall exports from or capital flows to the Baltic States, despite their relatively large ties to Russia. However, the decline in confidence in the region, and in …
22nd September 2014
The near-collapse of the Turkish Islamic bank, Bank Asya , seems to be an isolated incident, the result of political feuding more than bad credit decisions. But it has put the spotlight back onto Turkey’s banking sector. And while the improvement in …
19th September 2014
August’s raft of Russian activity data suggests that the economy continued to stagnate. Growth in the industrial sector slowed, while the slump in investment activity deepened further. What’s more, consumer spending which had, until recently, been the key …
17th September 2014
The sharp fall in the ruble over the past week or so reflects a combination of factors, including the drop in oil prices, continued capital flight in the context of the ongoing conflict in Ukraine and – perhaps most importantly – reduced support from …
16th September 2014
The Russian central bank left interest rates unchanged today, having raised rates by 250bps over the firstsix months of the year. But with inflation set to rise further over the coming months and upside risksbuilding, we think that interest rates will be …
12th September 2014
The slowdown in Central and South Eastern Europe in the second quarter has raised concerns about the region’s exposure to the crisis in Ukraine. In this Watch , we dig deeper into the GDP data to see what was behind weaker growth. The short point is that …
11th September 2014
Today’s weaker-than-expected Turkish Q2 GDP data reinforce the point that interest rate hikes earlier in the year are continuing to weigh on domestic demand. The poor figures are likely to result in further pressure on the central bank to cut interest …
10th September 2014
The recovery in Emerging Europe has fizzled out in recent months and we think growth will be sluggish over the coming quarters. The crisis in Ukraine presents one headwind, particularly for Russia. But growth prospects in the rest of the region will hinge …
5th September 2014
The Polish MPC made it pretty clear at today’s post-meeting press conference that subdued growth and extremely low inflation mean that interest rates will be lowered over the coming months. For now, we suspect that the easing cycle will be limited to …
3rd September 2014
Last month’s batch of manufacturing PMIs suggests that the recent slowdown in the Turkish economy may have bottomed out but it provides yet further evidence of weakening growth in Central Europe. … August’s PMIs suggest growth in Central Europe slowed …
1st September 2014
Claims by Ukraine’s government that Russia has deployed troops in the east of the country have led to sharp falls in financial markets across Emerging Europe today. Some of the sharpest falls have, understandably, been in Russia itself, where hopes that a …
28th August 2014
Although inflation at the aggregate EM level remains fairly benign, there are big differences between the main EM regions. Inflation is fairly low in most of Emerging Asia, but is high and rising in Latin America. Despite dropping back slightly last …
27th August 2014
The decision by Turkey’s central bank to cut its overnight lending rate, which forms the upper bound of the corridor in which market rates are allowed to fluctuate, suggests that it is becoming less concerned about the economy’s external vulnerabilities. …
Turkish policymakers have argued that the recent rise in inflation is a temporary phenomenon and this, in turn, has fuelled speculation in the markets that interest rates will be cut further. However, while we expect inflation to drop back a little over …
26th August 2014
The fall in oil prices over the past month poses another headwind for Russia’s struggling economy. The drop in prices is unlikely to have a major bearing on the outlook for the rest of this year – although it does limit the scope for fiscal stimulus to …
22nd August 2014
There are rising concerns about the sustainability of Ukraine’s public debt and the possibility that the government may be forced to default. We agree that Ukraine’s public finances are in a mess. However, we think that the debts of the private sector may …
21st August 2014
The raft of second quarter GDP data released in Central and South Eastern Europe this month showed that growth eased across much of the region. It’s tempting to interpret this as a sign that the Ukraine crisis has derailed the region’s recovery. But in …
20th August 2014
July’s activity data will do little to ease concerns about the outlook for Russia’s economy. Industrial production accelerated a little and agricultural production strengthened on the back of this year’s good harvest. But retail sales remain extremely …
19th August 2014
Softer growth across much of Central and Eastern Europe in Q2 is likely to be attributed to spillovers from the crisis in Ukraine but, while this may have weighed on business confidence in some countries, we suspect the bigger driver of Q2’s slowdown was …
14th August 2014
Recep Tayyip Erdogan’s election victory and intrigue about the composition of the government have dominated the headlines in Turkey. But the fact that the economy has slowed sharply over the past few months has slipped under the radar. This is likely to …
13th August 2014
After a torrid Q1, the Russian economy performed a little better in Q2. Although growth slowed a touch in annual terms, output appears to have grown over the quarter. Nonetheless, the respite is likely to be brief. The early signs are that Q3 could bring …
11th August 2014
