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Having cut interest rates earlier today, the National Bank of Hungary once again didn’t give much away about the outlook for monetary policy. The MPC appears to have become a little more dovish regarding the inflation outlook, suggesting that there could …
27th May 2014
The raft of Q1 GDP data released this month showed a growing divergence in the region. The crisis in Ukraine and threat of Western sanctions took a heavy toll on the Russian economy, which seems to be slipping into recession. By contrast, growth in the …
23rd May 2014
Following today’s surprise move by the Turkish central bank to lower its one-week repo rate, it looks like the MPC will continue to ease policy over the coming months. But given the country’s persistent external vulnerabilities and high rate of inflation, …
22nd May 2014
The sharp fall in many emerging market (EM) currencies over the past year has not led to the big EM-wide inflation shock that some were predicting. Looking ahead, we expect inflation across the emerging world as a whole to remain fairly subdued. … Impact …
21st May 2014
The benefits to the Russian economy from the $400bn deal signed earlier today between Russia and China are likely to be smaller than most seem to think. Instead, the importance of the deal is largely symbolic. In the midst of the Ukraine crisis, Russia …
The preliminary estimates of first quarter GDP for Central and South Eastern Europe provide further evidence of a gradual recovery in the region. The main factor behind the improvement in growth appears to be strengthening demand from the euro-zone, and …
15th May 2014
The recent rebound in the ruble has led the market to price in interest rate cuts by the Central Bank of Russia (CBR) over the coming months. We think this is premature. Leaving aside the fact that the ruble remains vulnerable to any further escalation of …
14th May 2014
This week’s preliminary first quarter GDP data for Central and South Eastern Europe are likely to show that the region’s economic recovery strengthened at the start of the year, in spite of fears of contagion from the crisis in Ukraine. Indeed, we think …
13th May 2014
The recent appreciation of the Turkish lira has taken many analysts – ourselves included – by surprise, not least because the economy still has large external vulnerabilities. These vulnerabilities mean that, despite the strengthening of the exchange rate …
President Putin’s call on pro-Russian separatists in eastern Ukraine to postpone a referendum on independence scheduled for this Sunday has once again raised hopes that a diplomatic resolution to the crisis in Ukraine might be found, and has triggered a …
8th May 2014
The Polish MPC hinted at today’s post-meeting press conference that it may not extend its pledge to leave interest rates unchanged beyond Q3. While this could be interpreted as a sign that the MPC is paving the way to raise interest rates before the end …
7th May 2014
With inflation in Romania set to rise over the second half of this year, it seems unlikely that there will be further interest rate cuts. But equally, large amounts of spare capacity in the economy mean that, barring a sharp fall in the leu, there will be …
6th May 2014
The surprising fall in Poland’s manufacturing PMI last month could be interpreted as a sign that the crisis in Ukraine is taking its toll on Central and Eastern Europe. However, we would be cautious about reading too much into this. Other leading …
2nd May 2014
The approval by the IMF of its $17bn financial support package for Ukraine is likely to ease concerns that the economy could suffer a near-term crisis, but severe challenges remain. The short-term pain stemming from the programme could well be greater …
1st May 2014
Having cut its benchmark interest rate earlier today, the National Bank of Hungary appears to be keeping all its options open regarding future movements in the policy rate. For what it’s worth, we think today’s cut probably marked the end of the easing …
29th April 2014
With Russia facing further sanctions from the West over its alleged involvement in the turmoil in the east of Ukraine, in this Focus we answer five key questions about the potential economic and financial market implications for Russia. The key point is …
28th April 2014
An acceleration in inflation, in part due to the recent sharp drop in the ruble, caused Russia’s central bank to hike interest rates by 50bp today. Looking ahead, with inflation likely to remain high and the ruble vulnerable to a further escalation in …
25th April 2014
The current period of subdued inflation in the emerging world shows no signs of nearing an end. One possible risk to the outlook is an El Niño, which weather forecasters warn could be on its way, and has the potential to cause serious disruption to the …
24th April 2014
Financial markets across Emerging Europe have proved relatively resilient to the recent escalation in political unrest in eastern Ukraine. But at the same time, the recovery from the losses earlier in the year has been disappointing, meaning that Emerging …
23rd April 2014
March’s activity data show that although the crisis in Ukraine and the first round of Western sanctions have not caused Russia’s economy to collapse, annual growth has still slowed substantially and output may have contracted in quarter-on-quarter terms …
17th April 2014
The latest activity data show that the recovery in Central Europe that started in the second half of last year gathered pace in Q1. Our GDP trackers suggest that growth in the Czech Republic, Hungary and Poland could have picked up to as much as 3.5% y/y. …
16th April 2014
The escalation of unrest in the east of Ukraine has thrust the issue of Western sanctions against Russia back onto the agenda. No side would win in a tit-for-tat exchange of sanctions, but by the same token we suspect that Russia is more vulnerable to …
15th April 2014
The discussion about how to soften the fallout from the Ukraine crisis on the Russian economy has started to shift towards fiscal stimulus, with key ministers advocating looser fiscal policy earlier this week. But while fiscal stimulus could cushion the …
10th April 2014
Following the decision to leave interest rates on hold earlier today, Governor Belka acknowledged that the Polish economy appears to be undergoing a strong recovery at this afternoon’s post-meeting press conference. Nonetheless, with inflation pressures …
9th April 2014
Unrest in the east of Ukraine has cast the spotlight back onto the political troubles facing the country’s interim government. What happens from here is highly uncertain, but in the meantime the economy is still extremely fragile. The recently-agreed deal …
8th April 2014
The recent appreciation of the Turkish lira has caused the central bank’s (CBRT’s) MPC to adopt a more dovish stance, with Governor Basci suggesting that measures might be taken this month to loosen monetary conditions. For our part, we think it would be …
7th April 2014
Prime Minister Orban’s Fidesz party swept to victory in yesterday’s parliamentary election in Hungary and, in the very near term, his premiership is likely to come alongside a strengthening economic recovery. But the bigger picture is that there are …
The final estimate of 2013 GDP data reveals that Russia’s economy picked up a little pace towards the end of last year. But our GDP Tracker suggests that the recovery had already started to fizzle out in the first few months of this year – and the fallout …
1st April 2014
Manufacturing PMIs fell across Emerging Europe last month, but in the highly-open economies of Central Europe the data are still consistent with robust manufacturing output growth, of 7-10% y/y. By contrast, the data showed that manufacturing in Turkey …
Turkish municipal election results showed that PM Erdogan and the ruling AK party continue to enjoy high levels of popularity, bolstered by the strength of the economy. Nonetheless, in spite of today’s release of strong Q4 GDP data, we expect growth to …
31st March 2014
The deterioration in the inflation outlook and concerns about triggering a sell-off in the currency caused the National Bank of Romania to bring its easing cycle to an end. But, barring a sharp fall in the leu, we don’t think policymakers will start to …
28th March 2014
A spike in global agricultural commodity prices has raised concerns that the current period of subdued inflation in the emerging world could be nearing an end. But the recent increases still leave global prices lower than a year ago, making it highly …
The weakness of Czech inflation prompted the National Bank’s MPC to strike a slightly more dovish tone at this afternoon’s post-meeting press conference. The strengthening economic recovery means further easing is unlikely, but we think monetary …
27th March 2014
This morning’s announcement by the IMF that it has reached a staff level agreement to provide financial support to Ukraine of $14-18bn reduces the risk of a balance of payments crisis and a default on public foreign currency debt. The current government …
The escalation of the crisis on the Crimean peninsula is already taking a toll on Russia. The economy was doing little more than stagnate even before geopolitical tensions flared up. And large scale private sector capital flight of around $70bn in Q1 …
26th March 2014
Following the cut in interest rates in Hungary earlier today, the MPC gave the clearest signal yet that the easing cycle has come to an end. Policymakers did not completely close the door on further easing. But if more rate cuts are forthcoming, they’re …
25th March 2014
Russia’s financial markets have posted heavy losses following the escalation of the crisis on the Crimean peninsula. Indeed, Russia’s stock market and the ruble have been the worst performers among all major EM equity markets and currencies since the …
24th March 2014
The sharp fall in the ruble over the past few months is unlikely to have a major impact on Russia’s economy as a whole , but it will create winners and losers within the economy. The government is likely to be one of the major winners. By contrast, …
21st March 2014
Having emerged from the global financial crisis in surprisingly robust health, Poland’s economy slowed sharply in 2012-13. Nonetheless, growth has started to pick up more recently and, as we explain in this Focus , we think there are five reasons to …
20th March 2014
The Turkish central bank left interest rates on hold today, but the bigger picture is that high inflation and a large current account deficit mean that policymakers will have to keep monetary conditions tight. As such, we expect growth to slow sharply …
18th March 2014
We estimate that net private sector outflows of capital from Russia have totalled $50bn since the start of the year – equivalent to 2.5% of GDP. What’s more, if the current pace of capital flight continues over the coming weeks, net outflows are on course …
17th March 2014
Having hiked interest rates at an unscheduled meeting earlier this month, it was always likely that the Central Bank of Russia would leave them unchanged at today’s (scheduled) Board meeting. Attention is now turning to when and how quickly policymakers …
14th March 2014
Ruling parties look set to win handsomely in parliamentary elections in Hungary and local elections in Turkey in the coming weeks. However, while the outcomes may be foregone conclusions, both countries could suffer from financial market volatility in the …
The direct economic impact of the sanctions that have apparently been agreed by Western governments on Russia is likely to be limited. But the indirect impact – including the anticipation of further, more stringent, measures – could be more damaging. … …
13th March 2014
The crisis in Ukraine has unsettled the markets, but the economic fallout should be contained to the two countries directly involved – Ukraine and Russia. Ukraine is by far the more fragile of the two and is in urgent need of financial support to avoid a …
12th March 2014
It looks like Ukraine’s banking sector has withstood the political crisis in better shape than we had feared. Credit conditions are likely to tighten sharply over the coming months, but a messier outcome seems to have been averted. Recent progress towards …
11th March 2014
The breakdown of Q4 GDP data for Central and South Eastern Europe shows that, while exports remain the main driver of growth in the region, domestic demand is coming out of its recent slump. … Domestic demand joining the …
6th March 2014
While the National Bank of Poland pledged to keep interest rates unchanged until at least the end of Q3 this afternoon, we think that the weakness of inflation should allow the MPC to leave interest rates at their current level of 2.5% into next year. … …
5th March 2014
The economies of Central and Eastern European are the most exposed to spillovers from the crisis in Ukraine, but as things stand the economic impact is likely to be limited. Admittedly, the crisis has the potential to escalate – the key risk for the …
4th March 2014
Although financial markets in Russia have tumbled today, the immediate fallout from the Ukraine crisis for Russia’s economy might well be less severe than many fear. Nonetheless, with growth already stagnating, it will only add to the headwinds facing …
3rd March 2014
