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Part of the weakness of May’s activity data in Russia can be explained by working day effects. Nonetheless, the bigger picture is that while there is some (albeit tentative) evidence that the slump in growth over the past year may be bottoming out, there …
20th June 2013
Emerging Market (EM) inflation edged down last month and looks likely to remain subdued, in spite of the recent sell-off in EM currencies. … Currency sell-off unlikely to push EM inflation …
19th June 2013
Turkey’s financial markets have taken a pounding over the past few weeks as the recent wave of protests caused investors to take fright. Elsewhere, currencies and foreign currency bonds have lost ground across Emerging Europe against the backdrop of fears …
The Turkish central bank’s decision to keep interest rates on hold today probably marks the end of the easing cycle. In fact, policymakers have already tightened monetary conditions in recent weeks. And looking ahead, concerns about a potential tapering …
18th June 2013
The financial markets have shrugged off the resignation of Czech Prime Minister, Petr Necas, this morning. However, the corruption allegations that led to his departure, as well as the recent outbreak of protests in both Turkey and Bulgaria, serve as a …
17th June 2013
There are signs that pressure from the Russian government on both the central bank and commercial banks to lower interest rates may be starting to have an impact on borrowing costs in the real economy. The problem is that this has so far failed to trigger …
13th June 2013
The Turkish central bank’s much-vaunted “reserve option mechanism” doesn’t appear to have smoothed movements in the currency, as had been hoped. This means that the Bank may have to rely on more conventional measures to shore up the lira. … Turkey’s ROM …
12th June 2013
First quarter GDP growth in Turkey was stronger than expected, driven by an impressive turnaround in domestic demand. But the flipside of domestic demand-led growth is that the current account deficit is widening again, a trend that has continued at the …
11th June 2013
The protests that have gripped Turkey over the past couple of weeks have come at a time when the country’s economic vulnerabilities appear to be mounting. This week, as well as the ongoing protests, the markets will have to digest tomorrow’s Q1 GDP …
10th June 2013
Sergey Ignatiev ended his tenure as governor of the CBR by leaving key interest rates on hold today but, with inflation on course to fall over the second half of the year and Mr. Ignatiev’s successor likely to take a more dovish stance, we think the Bank …
Although it is difficult to draw a direct link between political stability and GDP growth, it does seem that better governance has played a key role in attracting the inflows of foreign capital that have underpinned Turkey’s improved economic performance …
7th June 2013
The breakdown of Q1 GDP across Emerging Europe showed that the region’s economy is probably in a slightly better shape than the (weak) headline growth figures would suggest. Accordingly, we think that growth will accelerate a little over the coming …
6th June 2013
Today’s convergence report by the EC, which gave the green light to Latvia to join the euro-zone in 2014, is likely to lead to further suggestions that Latvia serves as a role model of “internal devaluation” for the euro-zone periphery. However, it is …
5th June 2013
Following today’s cut in Polish interest rates, Governor Belka gave few hints about the likelihood of further easing. We think it’s most likely that interest rates will be left on hold at 2.75% over the coming months, although the risks to this forecast …
The sharp increase in Russian inflation in May means that interest rates are likely to be left on hold when Russian central bankers meet next week. However, inflation continues to be driven by food prices, while core pressures remain subdued. As such, we …
4th June 2013
While Turkish asset prices have regained some of their lost ground today, the outbreak of protests over the past few days has re-focused attention on the country’s economic vulnerabilities. In particular, it is highly reliant on external funding, which …
May’s PMIs provided some encouraging signs that manufacturing in Central Europe is turning the corner, helped by stronger demand from Germany. Worryingly though, the data indicate that the Turkish economy was slowing even before the outbreak of violent …
3rd June 2013
The breakdown of Polish Q1 GDP data confirmed that domestic demand remained extremely weak and it looks like there has been little improvement in April. Combined with below-target inflation, we think this means that the National Bank will cut interest …
29th May 2013
The weakness of Hungary’s economy, coupled with below-target inflation, means that further interest rate cuts are likely over the next couple of months. However, we think the country’s high level of foreign currency debt means that many commentators and …
28th May 2013
April’s activity data will dent any remaining hopes for a quick rebound in Russian growth following the slump in Q1. As a result, the Central Bank is likely to come under yet further pressure to cut interest rates. But aggressive easing remains unlikely. …
24th May 2013
The raft of preliminary GDP data released earlier this month provided some hope that the region’s slowdown bottomed out in the first quarter of the year. Nonetheless, growth is extremely weak, at just under 1% y/y, and performances across Emerging Europe …
The continued weakness of Russia’s economy has led to questions about what policymakers can do to stimulate growth and, with the central bank reluctant to loosen monetary policy, there is a growing likelihood that the government will turn to fiscal …
23rd May 2013
As the distortions surrounding Chinese New Year have fallen out of the data, the underlying picture across Emerging Markets is one of weak price pressures. Looking ahead, there are few signs that inflation is about to pick up sharply any time soon. … EM …
21st May 2013
The pace at which parent banks in Western Europe have scaled back funding for subsidiaries in Eastern Europe has slowed further since the start of the year. Nonetheless, credit conditions in much of Eastern Europe remain extremely tight. … Parent bank …
Russia’s Q1 GDP data were not as bad as feared, but growth still slumped to its weakest pace since 2009. This will fuel the ongoing debate about the need for economic stimulus. But with the slowdown being driven in part by structural factors, we fear …
17th May 2013
Turkey’s second investment grade rating awarded last night was long-anticipated and is unlikely to have much impact on bond yields. In fact, Turkey’s large external financing risks mean that it is one of the most exposed EMs to a deterioration in investor …
We think the Turkish central bank (CBRT) will follow up today’s 50bp cut in interest rates with a further 25bp cut over the coming months. But policymakers may also continue to offset the impact of lower interest rates by hiking reserve requirements or …
16th May 2013
While central banks across much of the emerging world are cutting interest rates, high inflation prevented the Central Bank of Russia from doing so today, in spite of the weakness of the economy. Nonetheless, we expect inflation to fall over the coming …
15th May 2013
The raft of preliminary Q1 GDP data for Central and South Eastern Europe, released today and yesterday, suggests that, while the slowdown at the end of last year has bottomed out, growth is sluggish and uneven. On a positive note, Hungary has emerged from …
The slowdown in Emerging Europe appears to have bottomed out at the start of the year. We expect growth to pick up over the second half of 2013, but the risk of a flare-up in the euro-crisis, the fragility of the region’s banks and the threat of a spike …
14th May 2013
Today’s preliminary estimate of Polish GDP showed that the economy was in a weaker state at the start of the year than many had anticipated. Admittedly, there is a fair amount of uncertainty about whether the data will be revised in the future (probably …
A raft of Q1 GDP data due to be released over the coming weeks is likely to show that growth stabilised in most of Emerging Europe. Russia is the notable exception. Here, the slowdown seems to have deepened further. The good news is that regional growth …
13th May 2013
Turkish equities have been the region’s star performer once again over the past month amid growing optimism about the economic recovery, the rising prospect that a second ratings agency will assign Turkey investment grade status and reduced concerns about …
10th May 2013
Following today’s cut in Polish interest rates, Governor Belka was guarded in his comments about whether further policy easing is on the cards. But with inflation likely to fall further below the Bank’s target and activity set to remain sluggish, we …
8th May 2013
In spite of the rapid build up of Turkish banks’ foreign currency assets held at the central bank, we think the country’s banking sector is still more vulnerable to an external shock now than it was on the eve of the 2008/09 global financial crisis. … …
7th May 2013
Romanian policymakers provided pretty clear signs this afternoon that they plan to start easing policy. They were ambiguous on the timing, but we think that interest rate cuts could come once inflation starts to fall back to target in Q3. That said, high …
2nd May 2013
April’s PMIs show signs of a renewed downturn in manufacturing in Central Europe. And tempting as it is to blame the weakness of German industry, it looks like domestic factors are playing a role too. The survey was particularly weak in Poland and, …
The decision by Russia’s Finance Ministry to increase the oil price forecast used in the budget appears to be an effort to paper over shortfalls in non-oil revenues, including from lower-than-expected privatisation receipts. But with oil prices already …
30th April 2013
The slowdown in growth in Emerging Europe appears to have bottomed out in the first quarter of this year. We estimate that, at an aggregate level, the region grew by around 0.8% y/y, in line with growth in Q4 of last year. At a country level, Russia has …
29th April 2013
The weakness of the latest Polish inflation and activity data suggests that the central bank could resume its easing cycle. Admittedly, the MPC appears divided on whether further easing is needed. But we think that sluggish economic growth will prompt a …
25th April 2013
Emerging Market (EM) inflation fell back in March as temporary distortions related to the Chinese New Year dropped out of the annual comparison. Looking ahead, with underlying price pressures remaining weak and global commodity prices now declining, we do …
Following a decade of rapid growth, we think that the Russian economy is entering a new phase where much weaker growth becomes the norm. We believe the economy is unlikely to grow by much more than 2-3% per year over the next decade – well below average …
Falling inflation and an economy struggling to escape from recession mean that further interest rate cuts are likely in Hungary. But we remain of the view that currency concerns will prevent aggressive steps to ease policy. … Forint concerns limit scope …
23rd April 2013
The drop in oil prices over the past month will limit the room for fiscal stimulus in response to the slump in Russia’s economy since the turn of the year and is another reason to expect the recovery to disappoint. But in the absence of a much sharper …
17th April 2013
The raft of Russian activity data for March, due to be released this week, is likely to show a slight improvement from February. But growth in Q1 is still set to be much weaker than at the end of last year. This slowdown has taken policymakers by …
16th April 2013
The weakness of the latest inflation data across Central Europe should allow further loosening of monetary policy, even in Poland, where we have now pencilled in a 25bp rate cut later this year. … Weak inflation to trigger further Polish rate …
15th April 2013
We expect the Central Bank of Turkey to cut its benchmark one-week repo rate for the first time in four months at next week’s MPC meeting. But the myriad of different tools now deployed by the Bank means that despite the likely cut in the policy rate, …
12th April 2013
The Polish MPC appears to have taken a slightly more dovish stance since last month following weaker-than-expected inflation and activity data. Our base case remains that interest rates will be left unchanged this year. But if the recovery fails to …
10th April 2013
The failure of the authorities to agree on a new IMF programme leaves Ukraine extremely exposed if financial market tensions flare up again. Meanwhile, the government has recently unveiled its economic programme for 2013-14 worth some 30% of GDP, which …
Most Emerging European stock markets and currencies have weakened over the past month on the back of the Cypriot crisis and fears of contagion to the rest of the euro-zone. This serves as a timely reminder that the crisis in the euro-zone is far from …
8th April 2013
