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After a boom and bust in domestic demand over the last decade, Bulgaria’s economy appears to be shifting towards export-led growth and away from over-reliance on domestic consumption. But the good news ends here. Close ties to the euro-zone periphery and …
3rd May 2012
The National Bank of Romania’s (NBR’s) decision to keep interest rates on hold today suggests that the easing cycle is on hold until the political situation (and the leu) stabilises. … Romanian rates on hold until politics …
2nd May 2012
April’s manufacturing PMIs suggest that industrial output in most of Emerging Europe contracted last month – mirroring the recent deterioration in the survey data from Germany. More worryingly, the forward looking aspects of the PMI surveys from much of …
Russia is unlikely to run large current account surpluses for much longer. But while her days as a ‘super saver’ nation look numbered, we are equally sceptical of Russia’s ability to sustain large current account deficits. Accordingly, any fall in oil …
The fall of Romania’s cabinet earlier today adds to the growing list of European governments to be toppled by a backlash against austerity, reinforcing our below-consensus forecast for growth this year. … Romania’s government falls victim to austerity …
27th April 2012
Recent data suggest that the Ukrainian economy slowed sharply at the beginning of the year. With the outlook for the euro-zone still bleak and the Russian economy on course to slow too, we think Ukrainian growth this year will fall well short of the …
26th April 2012
Financial markets across Emerging Europe have been hit by fresh concerns about the euro-zone debt crisis in recent weeks. So far at least, the sell-off in the region’s markets has not been as dramatic as that seen in the last few months of 2011. But with …
Signs that the European Commission (EC) is willing to be more lenient in its discussions with Hungary over a new IMF/EU financing programme suggest that an agreement could be reached more quickly than we had originally anticipated. However, we would …
25th April 2012
European shale gas reserves will take many years to develop, but in time the impact on Russia’s energy exports could be substantial. We estimate that Russia’s revenues from gas exports to Europe may ultimately fall by the equivalent of 1% of GDP, with …
20th April 2012
The financial markets have shrugged off signs that the Czech Republic may be heading towards fresh elections that could ultimately derail fiscal consolidation plans. This makes sense. For a start, the current government may still muddle through. And even …
19th April 2012
Earlier today we attended a meeting with Hungarian Minister of Economy, Zoltan Csefalvay. We left with the impression that, while the government talks a good game on the need for medium-term economic reforms, it underestimates the near-term challenges …
18th April 2012
Our latest Banking Heat Map paints a mixed picture: in some countries (notably Hungary and the Baltic States) credit continues to shrink, in others (Turkey) a boom in lending over the past year or so has hit the buffers and in one (Russia) credit growth …
17th April 2012
Fresh concerns about the Hungarian government’s willingness to accept the conditions for help from the EU and IMF have led to renewed tensions in its financial markets. Attention has focused on reforms (or lack of) to the controversial central bank law, …
16th April 2012
Headline inflation remains above-target in most of Emerging Europe. But inflation fell in several countries last month while core price pressures are subdued everywhere apart from Turkey. … Core inflation weakens in Eastern …
13th April 2012
The recent fall in Russia’s stock market from the highs seen in the middle of last year is all the more surprising given the strength of oil prices. With economic growth set to slow, hopes for much-needed reform likely to fade and the risks to oil prices …
The early indications are that Russia’s economy grew by around 4.5% y/y in the first quarter of this year, making it one of the region’s best performers. Unfortunately, sustaining this pace of growth over the rest of this year will prove difficult. … …
12th April 2012
February’s current account data show that the rebalancing of the Turkish economy is progressing more smoothly than we had feared. At its current rate of progress, it will still take another 18 months or so to bring the current account deficit onto a …
11th April 2012
The introduction of Hungary’s early FX mortgage repayment scheme last September was one in a chain of events that severely dented market confidence in local policymaking and sent the economy to the brink of crisis late last year. Although the scheme has …
5th April 2012
Polish policymakers left interest rates unchanged this afternoon, but Governor Belka’s subsequent remarks that the MPC were “seriously” considering raising rates has triggered a sell-off in the bond market, particularly at the short end of the curve. We …
4th April 2012
The relatively modest drop in steel prices that we expect later this year would not be a game-changer for Ukraine, but it would exacerbate growing strains in the balance of payments and public finances. … Ukraine: downside risk to steel prices adds to …
3rd April 2012
The deceleration of the Turkish economy in Q4 was not as bad as we had feared. However, the strength of net exports masked a much sharper slowdown in domestic demand – a process which has much further to run in order to bring down Turkey’s huge gaping …
2nd April 2012
The manufacturing PMIs for March add to recent data suggesting that, while conditions in Emerging Europe are slowly improving, growth in Q1 of this year was still pretty lacklustre. The sharp jump in Hungary’s PMI stands out, but it is worth bearing in …
The National Bank of Romania (NBR) cut interest rates today amid concerns that the economy is on the cusp of a new recession. We expect one further cut this year, but the threat of financial contagion from the euro-crisis is a formidable barrier to more …
29th March 2012
The Russian economy is in a sweet spot for now: inflation is at record lows and growth is strong. But we doubt that this will last. Indeed, the authorities are likely to find themselves in an awkward position by the end of the year as growth slows, and a …
The rally in financial markets since the start of the year has lost some steam in recent weeks. Most stock markets have fallen by around 2-3% since the start of the month and most currencies lost a little ground against both the dollar and the euro …
28th March 2012
Central banks in both Hungary and Turkey kept interest rates unchanged today as the recent increase in market tensions snuffed out any hope of a shift towards looser policy. We expect the bias towards tighter policy to remain over the coming months. … …
27th March 2012
Poland is one of the few countries in Europe where consumer spending has made a significant positive contribution to growth in recent years. However, we think that actual retail sales may be growing at just under half the rate suggested by the official …
26th March 2012
We suspect that Hungary will ultimately turn to some form of default as a way out of its current debt problems. The alternative is further austerity – and while we expect Hungary to pursue this path for a little longer, we are not convinced that the …
23rd March 2012
The recent spike in oil prices will make it harder for Turkey to rein in its current account deficit. But there is more to Turkey’s current account shortfall than simply the high cost of energy imports. The main reason why the deficit has widened over the …
21st March 2012
The usual raft of monthly activity data, released earlier today, confirmed that Russia’s economy remains in a decent shape, helped by the recent rise in the oil price. As things stand, GDP seems on course to grow by around 4.0-4.5% y/y in Q1. With the …
20th March 2012
The wide dispersion of growth rates across Emerging Europe masks big differences in the fundamental health of the region’s economies. In this Watch we explain why looking at levels of GDP is a much better guide to relative performance – and future …
The IMF is highly unlikely to approve Ukraine’s request to restructure $3bn of loan repayments due this year, but the fact that the government is even considering such a move demonstrates the extent to which it is running out of options. … Ukraine is …
15th March 2012
February’s inflation data were stronger than expected across Emerging Europe, fuelling concerns that the recent jump in oil prices is feeding into higher headline inflation. But we think this reading of the data is misguided. Instead, headline inflation …
14th March 2012
Tensions in financial markets have eased in recent months, but the outlook for Emerging Europe remains challenging. We expect the region to grow by just 1.3% this year and 3.0% in 2013. This is well below consensus expectations. At a country level, Poland …
Victory for the left-wing populist Smer party in Slovakia’s parliamentary election this weekend is likely to cause alarm that the commitment to austerity is fraying. While it is undoubtedly necessary to rein in Slovakia’s budget deficit over the …
12th March 2012
Final GDP data for Central and South Eastern Europe reinforced the view that Q4 was perhaps not as bad as we might have feared – growth accelerated in Poland and Slovakia and even the beleaguered Hungarian economy grew. However, there were a few common …
9th March 2012
Today the National Bank of Poland (NBP) pushed up its 2012 inflation forecast which, on the face of it, is likely to provide further support to the argument that any move in interest rates this year is more likely to be up than down. By contrast, we think …
7th March 2012
The notion that the Hungarian government can prevent a future sell-off in the forint simply by reviving talk of an IMF deal in times of market stress seems hopelessly misplaced. Our view remains that a combination of a fragile banking sector, unorthodox …
The numerous benefits of high oil prices for the Russian economy have concealed the bigger picture that over the past decade they have also served as a hindrance to much-needed political and economic reform, and hence, faster growth. … Why would Russia …
6th March 2012
The widespread assumption among investors that Vladimir Putin’s decisive victory in yesterday’s presidential election will deliver stability to Russia’s economy and its financial markets seems misplaced. Indeed, increasing strains in Russia’s growth …
5th March 2012
The surge in oil prices is unlikely to have a major impact on inflation in Emerging Europe but the impact on growth could be more significant. Ukraine and the Baltic States appear most vulnerable on this front. … Spike in oil prices is a bigger risk to …
2nd March 2012
February’s PMI data suggest that the slump in Czech and Hungarian manufacturing seen towards the end of last year has bottomed out. But while output is no longer falling, manufacturing in both countries and, indeed, across the region more generally does …
1st March 2012
Polish Q4 GDP data confirmed that the economy survived the slump in euro-zone demand at the end of last year relatively unscathed – unlike the rest of Central Europe. Nonetheless, with less scope for policy response now than in 2008/09, we remain …
The decision by the National Bank of Hungary (NBH) today to keep interest rates on hold at 7% was widely expected, with a narrow majority of policymakers now seemingly willing to wait and see whether or not the government can strike a new deal with the …
28th February 2012
With just over a week to go to Russia’s presidential election, the markets seem to have shrugged off the possibility of a fresh wave of civil unrest following the poll. Equities are up 20% since the start of the year, and the ruble is up 8% against the …
24th February 2012
The raft of Q4 GDP data released over the past month showed that growth slowed pretty much everywhere in Emerging Europe. The Czech Republic became the first economy in the region to fall back into a recession while even Poland saw a marked slowdown. …
23rd February 2012
We estimate that, if fully implemented, the various pledges made by PM Putin over the past couple of months would cause government spending to rise by Rb4.8trn by 2018 (equivalent to 4-5% of GDP). This in turn could push the “break even” oil price needed …
21st February 2012
The Turkish central bank’s (CBRT’s) decision today to lower the upper bound of its interest rate “corridor” suggests that it is increasingly confident of achieving a gradual adjustment in the current account deficit against the backdrop of improving …
Hungary’s government left it late to reply to the EC’s decision to start infringement proceedings. But the fact that it has done so, coupled with conciliatory comments from PM Orban, has raised hopes that a deal with the EU/IMF can be reached quickly. We …
17th February 2012
January’s inflation data in Emerging Europe has been a particularly mixed bunch, reflecting the impact of various indirect tax changes as well as the tail end of the commodity price shock a year ago. But once we strip out tax effects as well as food and …
16th February 2012
