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Pressure is mounting on Russian policymakers to act to stimulate the slowing economy. But unlike in 2008-09, there is little room for a large-scale fiscal stimulus. And substantial cuts in interest rates are unlikely given that rates are already close to …
5th April 2013
The “Funding for Growth” scheme announced by the National Bank of Hungary is not quite as radical as it could have been. This helps to explain the relatively muted reaction in the financial markets, but it also means that the overall impact on lending …
4th April 2013
Detailed Q4 GDP data for Russia, released earlier today, confirmed what we already knew – namely that economic growth slowed to its weakest pace in three years in the final quarter of last year. More importantly, growth at the start of 2013 appears to …
2nd April 2013
The latest batch of manufacturing PMIs in Emerging Europe shows that activity slowed across the board last month. Activity remains strongest in Turkey. But the weakness of the Central European readings, coming alongside signs that the German economy is …
The slowdown in the Turkish economy in Q4 of last year appears to be the trough, and our GDP tracker suggests that growth has picked up to around 2.5% y/y at the start of 2013. Nonetheless, the consensus’ expectation for growth of around 4% this year …
Most attention has focussed on the impact that the Cypriot bail-out could have on Russian depositors, but the deal may pose much bigger risks for Ukraine, which is already on the brink of a balance of payments crisis. … Don't underestimate Ukraine's …
28th March 2013
The loss to Russian investors from the levy on Cypriot bank deposits remains uncertain, but a plausible estimate is somewhere around €5bn. This is fairly small in the grand scheme of things and the levy itself is therefore unlikely to have a major impact …
Emerging market inflation has risen in recent months and is set to continue along this upward path in the near future. Looking further ahead, however, weak core price pressures combined with the fact that global food prices have fallen since last summer’s …
27th March 2013
The fact that Hungary’s new-look MPC did not lower interest rates by more than 25bps today underlines the extent to which policymakers are constrained by the threat of a sell-off in the financial markets and, in particular, the risk of a further weakening …
26th March 2013
Today’s cut in Turkey’s overnight lending rate is a cosmetic change, and doesn’t reflect an easing of policy. In fact, the central bank has tightened policy in recent weeks. And with domestic demand accelerating and external imbalances widening again, we …
The raft of weak activity data from Poland dents hopes that the economy turned the corner at the start of this year. With inflation set to remain below target, the National Bank is likely to resume its easing cycle unless there are signs of a pick-up in …
22nd March 2013
The latest activity data from Emerging Europe have been something of a mixed bag. Turkey is leading the recovery as a rebound in credit growth has fuelled domestic demand. Here, we think GDP growth accelerated to around 2.5% y/y in the first few months of …
21st March 2013
A raft of weak activity data for February puts a big dent in hopes for a rebound in the Russian economy in Q1. What’s more, there are further signs that the slowdown is being driven as much by structural as by cyclical factors. Accordingly, despite …
20th March 2013
Russia’s financial markets have taken fright this morning following the announcement of details of the Cypriot bail-out, which looks set to hit Russian deposits there hard. But despite the fact that Russian banks and companies stand to be among the …
18th March 2013
The appointment of the new governor at Hungary’s National Bank has created havoc. Investors have become unnerved at the prospect of drastic measures to boost the economy, leading to a fresh sell-off in the forint. We think the authorities are likely to …
The high rate of inflation continues to prevent the Central Bank of Russia from easing policy to support the slowing economy. But with inflation now close to peaking, interest rate cuts are possible over the coming months, and could come as soon as May’s …
15th March 2013
The decision by President Putin to nominate his economic advisor, Elvira Nabiullina, to be the next governor of the Central Bank of Russia is a blow to hopes for a more independent monetary policy over the coming years but is unlikely to lead to major …
12th March 2013
After a steady improvement over the past year, the narrowing of Turkey’s current account deficit stalled in January. What’s more, the latest data reveal an increasing dependence on short-term or “hot” capital inflows to fund the current account deficit, …
The breakdown of Q4 GDP data in Central and South Eastern Europe showed encouraging (albeit tentative) signs of an improvement in consumer spending. By contrast, exports were extremely weak. Leading indicators suggest that growth has probably accelerated …
11th March 2013
The rally in Emerging Europe’s financial markets has lost steam over the past few weeks. In part, this is due to the re-surfacing of tensions in the euro-zone following Italy’s inconclusive general election. But Hungarian financial markets have been …
7th March 2013
Today’s larger-than-expected cut in Polish interest rates means that we have probably reached the end of the easing cycle. But while some analysts are now suggesting that interest rates will be hiked within the next year, we expect rates to remain …
6th March 2013
Inflation in Russia rose to an 18-month high of 7.3% y/y in February but is now close to peaking. As it falls back over the coming months, interest rates are likely to be cut. Nonetheless, the room for aggressive easing is limited and we expect any rates …
5th March 2013
Events during the first few days of Gyorgy Matolcsy’s Governorship of Hungary’s central bank reinforce concerns about the Bank’s independence. At the very least, we are likely to see further interest rate cuts over the coming months. But it looks …
The development of shale gas in Europe is unlikely to have a significant impact on Russia’s energy exports over the next couple of years. But in time, it could prove to be the final nail in the coffin of Russia’s commodity-based growth model. From …
4th March 2013
The turnaround in the latest Polish data suggests that weak GDP growth in Q4 could mark the trough of the economic slowdown. This will no doubt lead to speculation that the National Bank’s easing cycle could come to a halt. For our part, we think the fact …
1st March 2013
The decision to nominate Economy Minister Gyorgy Matolcsy to become Hungary’s new central bank governor is another blow to the Bank’s independence and is likely to result in further interest rate cuts and possibly unconventional policies to boost lending. …
February’s PMI data add to recent evidence that the slump in Emerging Europe has bottomed out and that growth in the first quarter of this year should be an improvement on the final quarter of 2012. Turkey is still leading the way but there are also signs …
GDP data released over the past month showed that growth in Emerging Europe slumped to a postcrisis low of just 0.8% y/y in the final quarter of last year. Nonetheless, the latest surveys suggest that the region has now started to turn the corner. Turkey …
28th February 2013
Emerging market (EM) inflation looks to have found a floor in late 2012 and is set for a modest rebound over the first half of this year. Food inflation is likely to pick up in the coming months and there are also signs that core price pressures are …
27th February 2013
Growth in Emerging Europe sank to a post-crisis low in the final quarter of 2012 but the latest surveys suggest that the outlook has brightened a little since the turn of the year. We expect growth to accelerate over the first half of the year, but the …
The impending change at the helm of Hungary’s central bank will lead to further cuts in interest rates over the coming months. But the scope for easing will be determined in large part by whether global risk appetite holds up. If sentiment turns, either …
26th February 2013
Rising employment has been one of the few bright spots for the recession-stricken Hungarian economy. But this merely reflects the weakness (indeed absence) of labour productivity growth. And as long as labour productivity growth remains subdued, Hungary …
20th February 2013
The raft of activity data for January suggests that the slowdown in the Russian economy deepened at the start of this year. But while this will add to pressure on the Central Bank to start easing policy, we think rate cuts are still unlikely until …
19th February 2013
Although the Turkish central bank cut interest rates today, it also raised reserve requirements, so the overall impact on monetary conditions is ambiguous. The key point is that policymakers are in a Catch-22 whereby they are coming under pressure to cut …
The dire set of Q4 GDP data released across Central & South Eastern Europe over the past week or so has led to obvious questions as to how the region is being affected by the crisis in the euro-zone. The data suggest that the problems in the single …
18th February 2013
The raft of Q4 GDP data released today for Emerging Europe suggests that growth in the region sank to a post-2009 low of 0.8% y/y. An improvement in sentiment within the euro-zone should feed through to a pick-up in growth in Emerging Europe the first …
14th February 2013
The sharp slowdown in Russian growth towards the end of last year has drawn attention away from a much more important point: namely that it was driven by a slump in investment. In this month’s Watch we explain why raising investment is now more important …
13th February 2013
The Central Bank of Russia (CBR) kept its benchmark interest rates on hold today and signalled that, despite growing pressure from the government to ease policy, any move in rates in either direction is unlikely in the near future. This reflects the fact …
12th February 2013
The appreciation of Turkey’s real exchange rate has raised speculation that monetary policy could be loosened to weaken the lira. However, the most effective way to improve Turkey’s export competitiveness would be to reduce inflation, which is high by …
8th February 2013
This is the first edition of our new monthly Emerging Europe Markets Monitor . The purpose of this publication is to analyse the developments in local markets over the past month and give an update on our key forecasts. Equity markets in Emerging Europe …
7th February 2013
Policymakers in both Poland and the Czech Republic are becoming more optimistic about the economic outlook. But even so, we still expect a further cut in Polish interest rates next month. And while the Czech National Bank has scotched hopes of a move to …
6th February 2013
Russian inflation picked up to its fastest rate since late 2011 in January, giving the Central Bank a strong argument to withstand pressure from the government to start easing policy in the face of slowing growth. … Russia: pick-up in inflation rules …
5th February 2013
The continued improvement in sentiment towards the euro-zone has simultaneously eased external funding conditions for Emerging Europe’s banks and reduced the threat of financial contagion from the euro-zone debt crisis. Even so, banking systems in large …
4th February 2013
The latest batch of manufacturing PMI data from Emerging Europe provide the first signs that the region’s economy is turning around. However, for now at least, the recovery appears to be concentrated in Turkey and, to a lesser extent, Russia. Meanwhile, …
1st February 2013
Having dropped to a near-three-year low, EM inflation looks to have now bottomed out. Inflation is likely to rise further in the near term due to strengthening demandside pressures and increases in commodity prices. But the pick-up is unlikely to be …
Preliminary data showing that Russia grew by a solid 3.4% in 2012 masks the fact that the economy slowed fairly sharply over the course of the year and is now growing by around 2% y/y. The recent improvement in the global outlook suggests that the economy …
31st January 2013
The outlook for Emerging Europe has brightened considerably at the start of the year. Equities have rallied while the latest survey data from key euro-zone export markets have picked up markedly. However, so far at least, there has been little evidence to …
30th January 2013
Hungary’s external vulnerabilities mean that the scope for further interest rate cuts will depend on the forint holding up. The bigger picture, however, is that even if policy is eased further, frailties in the banking sector mean that rate cuts will do …
29th January 2013
Preliminary data showing that Poland’s economy grew by 2.0% in 2012 masks a slump in domestic demand towards the end of last year that has seen household spending growth drop to its slowest rate since the early 1990s. This strengthens the case for further …
While most emerging markets staged a recovery in the final months of 2012, Russia appears to have bucked the trend. The latest raft of activity data suggests that growth weakened to just 2% y/y in Q4, meaning that the economy probably grew by 3.5% in 2012 …
25th January 2013
