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There is a growing sense in the markets that the Polish National Bank could pause its easing cycle next month, but given the weakness of the most recent data, we think the case is less clear cut. For now, we have pencilled in a 25bp interest rate cut next …
24th January 2013
Although the Turkish central bank cut some of its key interest rates today, this doesn’t necessarily amount to monetary easing. In fact, we think there is little scope for falls in market interest rates and, if anything, policy is likely to tighten over …
22nd January 2013
Modest upward revisions to our (below consensus) forecast for oil prices this year do not radically alter our view on the economic outlook for Russia. The budget deficit is likely to be slightly smaller than we had originally expected, while the current …
The Bulgarian economy is in the middle of a lost decade. A lack of competitiveness against the backdrop of a fixed exchange rate, coupled with the country’s close proximity to the euro-zone’s weakest economies means that growth is set to remain extremely …
17th January 2013
Some commentators are starting to question the extent to which Russia has moved towards greater currency flexibility in recent years. We see little to justify these doubts. Improving global sentiment means that the ruble is likely to strengthen over the …
16th January 2013
Amid the public spat over who exactly is responsible for the recent sell-off in the Hungarian forint, the point that is being overlooked is that local factors, rather than global risk appetite, now appear to be driving the currency. With fears mounting …
15th January 2013
The Central Bank of Russia left its benchmark interest rates on hold this morning as was widely expected. More importantly, the tone of the accompanying statement reveals that the Bank has become increasingly worried about the recent economic slowdown and …
The appointment of Hungary’s new central bank Governor, due to be announced next month, has the potential to shatter the recent calm in the local financial markets. In this Watch , we assess the potential candidates for Governor and explain why we think …
10th January 2013
Polish interest rates will be reduced further over the coming few months but, for now at least, the stabilisation of the economy in the final quarter of last year appears to have dissuaded the MPC from cutting by more than 25bps at a time. … Polish …
9th January 2013
A spat towards the end of last year over the true scale of capital flight from Russia risks missing the bigger picture, which is that capital continues to flow out of the country in the first place. Most other large EMs experience significant inflows . …
8th January 2013
In spite of the recent easing in financial market tensions, there is little scope for Romanian policymakers to cut interest rates to support growth. As such, we think the economy is likely to flatline this year. … Little room for policy stimulus in …
7th January 2013
Turkey’s hefty external financing requirement makes it one of the most exposed economies in the emerging world to a fresh global shock, the most likely of which is a renewed escalation of the euro-crisis. Given our views on Europe, we therefore remain …
4th January 2013
The latest manufacturing PMI data suggest that industry in Emerging Europe is still stagnating. There are signs that activity in Turkey is accelerating, but this is being offset by further weakness in the highly open economies of Central Europe …
2nd January 2013
Emerging Market (EM) inflation slowed to a near-three-year low in November. Fears of a food-led inflation shock this year have proved to be misplaced, as we had expected. While inflation is likely to rise in early 2013 as a result of past increases in …
20th December 2012
Policymakers in Hungary and Turkey cut interest rates today as the general improvement in global risk appetite in recent months has reduced concerns over external vulnerabilities and allowed the authorities to focus on shoring up growth. But these …
18th December 2012
Growth across Emerging Europe has continued to slow in recent months and is likely to remain extremely weak in 2013. Official data suggest that the region grew by less than 2% y/y in the third quarter and our own GDP tracker suggests that the pace of …
17th December 2012
Inflation is falling sharply across Central and South Eastern Europe and we expect this to continue into next year. This should encourage further policy stimulus in the Czech Republic and Poland, although in Hungary there is less room for manoeuvre. … …
13th December 2012
Concerns are mounting that Turkey will be faced with a fresh wave of “hot” capital inflows. As it happens, we don’t think this is a credible threat – we expect a fresh escalation of the euro-crisis to cause capital inflows to dry up (again). But it is the …
12th December 2012
The Central Bank of Russia (CBR) left its benchmark lending rates on hold today, but hiked its overnight deposit rate by 25bps. Given the liquidity shortage in the interbank market and the fact that money market rates are well above the CBR’s deposit …
10th December 2012
The latest data from Turkey paint a pretty gloomy picture: Q3 GDP was weaker than expected and October’s industrial production figures suggest that the economy has made a poor start to Q4. The central bank is under pressure to cut interest rates but a …
The detailed Q3 GDP data for Central and South Eastern Europe make pretty grim reading. We fear that the slowdown in both domestic demand and exports may be a sign of things to come. … Q3 GDP growth hit by weak domestic …
7th December 2012
The run-up to Romania’s parliamentary election on Sunday has been surprisingly quiet. But we think the markets may be underestimating the risk of fresh turbulence following the vote. … Romanian elections to put leu under …
6th December 2012
For now, the Polish monetary easing cycle is progressing in 25bp steps, but we think the economy is set to slow further over the coming months which, ultimately, could trigger larger rate cuts by early next year. Either way, we think interest rates will …
5th December 2012
November’s PMIs were a positive surprise for Central Europe, where it looks like the manufacturingsector stabilised. Elsewhere, signs that Turkey’s exports may be flat-lining are worrying as they mean thatthe process of current account adjustment may have …
3rd December 2012
Q3 GDP data confirmed that the Polish economy has slowed sharply and with mounting external and domestic headwinds, we think growth will weaken further to just 1.0% in 2013. Accordingly, we expect interest rates to be cut by more than the markets have …
30th November 2012
A raft of recently released Q3 GDP data for Emerging Europe paints a pretty gloomy picture. The Czech and Hungarian economies are still stuck in recession, while even the region’s better performers – Russia and Slovakia – slowed sharply. Altogether, we …
29th November 2012
The improvement in global risk appetite has provided Hungary’s National Bank with the scope to loosen policy. But persistent financial vulnerabilities mean that, without an IMF deal in place, the Bank could be forced into rate hikes to defend the forint …
27th November 2012
Emerging Market (EM) inflation slowed in October. Even if inflation does pick up again in the coming months as a result of past increases in commodity prices, the big picture is that any rise is likely to be small and short-lived. … Inflation slows, …
23rd November 2012
A strong labour market combined with low and stable mortgage rates have not been able to prevent a small rise in mortgage arrears. Possessions are currently being kept low by continued lender forbearance. … Slowdown has further to …
22nd November 2012
At today’s MPC meeting, the Turkish central bank highlighted that it is becoming increasingly concerned about “hot” capital inflows and signalled that these could be countered with aggressive policy loosening in the coming months. However, insomuch as …
20th November 2012
Following last week’s disappointing GDP release, which showed that the economy slowed to just 2.9% y/y in Q3, the raft of activity data for October suggests that the slowdown has continued in Q4. We think growth is on course to ease further to just 2% in …
Tomorrow marks the first anniversary of the start of Hungary’s negotiations with the IMF. Unfortunately, we are no closer to a deal now than we were then. For the time being, the markets don’t appear to be attaching much weight to Hungary’s progress. But …
16th November 2012
Third quarter GDP data for Central and Eastern Europe make for pretty grim reading. Output contracted on a quarterly basis in three of the five countries that reported figures and the business surveys suggest that things are unlikely to improve in Q4. … …
15th November 2012
The upgrade to Turkey’s credit rating last week came in spite of the fact that there has been little underlying improvement in its sizeable current account deficit. This leaves the economy exposed to a fresh deterioration in investor risk appetite. … …
14th November 2012
A restructuring of local government debt in Hungary is by no means certain and, even if it did occur, would entail smaller losses for the banking sector than a similar restructuring of private sector debt late last year. But even so, the very fact that it …
13th November 2012
The Central Bank of Russia kept its key interest rates on hold today and the accompanying statement suggests that any change in rates is unlikely in the very near-term. We still think that policymakers will move into easing mode next year, but the scope …
9th November 2012
Third quarter GDP data, which are due to be released by most countries over the coming month, are likely to make fairly grim reading. We estimate that regional growth slowed to around 1.5-2.0% y/y in Q3, and the early signs are that Q4 is unlikely to be …
8th November 2012
Today’s decision by the National Bank of Poland to cut interest rates by 25bps to 4.50% suggests that policymakers are finally starting to acknowledge that the big threat to the economy comes from weakening growth, not high inflation. We expect at least …
7th November 2012
Today’s decision by Fitch to raise Turkey’s sovereign debt rating to investment grade is likely to have only a limited impact on financial markets since the move seems to have already been priced in by investors. … Turkish upgrade unlikely to be a game …
5th November 2012
Turkish equities have risen by over 40% since the start of the year, but we think that macroeconomic frailties and weaker global risk appetite could bring this rally to an abrupt end. … Turkish stock market rally looks …
2nd November 2012
After today’s decision to cut interest rates all the way to the zero bound, we expect the Czech National Bank to move into the realms of unconventional monetary policy measures next year. … Czech Republic moves to the zero …
1st November 2012
The latest PMIs show that manufacturing in the highly open economies of Central Europe remains in recession due in large part to falling external demand. By contrast, the Turkish PMI data provide early hopes that the economy may have accelerated towards …
Hungary continued to cut interest rates today, but financial vulnerabilities and a lack of progress towards an IMF deal mean that there is limited room for further easing. Accordingly, we don’t think that interest rates will fall as far as the market …
30th October 2012
Russia’s draft budget for 2013-15 implies that fiscal policy will become far more restrictive over the next three years. But it is doubtful that the government will be able to stick to its plans to constrain spending. And even if it does, this will only …
With 70% of the vote now counted, Ukraine’s ruling coalition looks likely to maintain its majority in parliament (although by a dangerously thin margin). The good news is that the election has so far passed smoothly, and political instability has been …
29th October 2012
The slowdown across Emerging Europe has intensified in recent months. We reckon that the region’s economy expanded at an annual pace of around 1.5-2.0% in Q3, down from 2.5% in Q2 and an average of 4.8% in 2011. Worryingly, the slowdown appears to have …
26th October 2012
There are tentative signs that the slowdown in Emerging Market (EM) inflation seen over the past year has bottomed out. We expect EM inflation to quicken over the next six months, mainly due to faster food inflation. Nonetheless, a repeat of the food-led …
25th October 2012
Earlier today we attended a meeting with Hungarian Minister of Economy, Zoltan Csefalvay. We left with the impression that the government’s plans for deficit reduction are still too optimistic and that we are no nearer to an IMF deal being agreed. … …
Having accelerated towards the end of last year, capital outflows from Russia have eased in recent quarters. Nevertheless, they remain substantial. And with the Central Bank now forecasting a current account deficit from 2015, Russia’s balance of payments …
22nd October 2012
Ukraine’s large external financing requirement and its heavy dependency on industrial exports to Western Europe make it among the most vulnerable countries in Emerging Europe to a re-escalation of the euro-crisis. This, coupled with the potential for …
19th October 2012
