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The “collateralised credit facility” unveiled by the National Bank of Hungary today may help to ease the maturity mismatch between banks’ assets and liabilities but it will do nothing to address the fundamental problem holding back credit growth in …
15th February 2012
Fears that euro-zone banks might suddenly withdraw their funding to subsidiaries in Emerging Europe have eased markedly over the past month, due in large part to the success of the ECB’s long-term refinancing operation (LTRO) in reducing strains in …
The raft of fourth quarter GDP data released this morning contained something for everyone: while Hungary defied the odds and grew in the final quarter of the year, the Czech economy contracted, making it the first in the region to slip back into …
Signs that Turkey’s current account deficit is narrowing, coupled with a marked improvement in global financing conditions, have raised hopes that it may be able to put its balance of payments on a sustainable footing without enduring a complete collapse …
13th February 2012
A raft of Q4 GDP data for Emerging Europe, due next week, is likely to show that growth slowed sharply across the region. It appears that the Czech economy ended 2011 in recession and the Hungarian economy contracted sharply over the quarter. The good …
10th February 2012
The improvement in global risk appetite over the past couple of months has raised hopes that Ukraine will be able to muddle through 2012 in order to meet its significant external financing needs without having to return to the IMF. We’re not yet …
7th February 2012
The economies of Asia and Latin America should be able to weather any financial contagion stemming from Europe’s debt crisis. But the economies of emerging Europe – notably Hungary, Turkey and the Balkan countries – look far more vulnerable to possible …
6th February 2012
It goes without saying that today’s resignation of the Romanian Prime Minister, Emil Boc, in response to growing public discontent with austerity, is likely to weigh heavily on the country’s financial markets over the next day or so. A much bigger …
December’s trade data provide the clearest evidence yet that the boom in Turkish domestic demand seen over the past couple of years has come to an abrupt halt. … Turkish boom hits the …
3rd February 2012
Currency concerns remain the key driver of interest rate decisions in Emerging Europe. The recent stability of the leu provided scope for Romanian policymakers to cut rates today. But in the Czech Republic, rates were kept on hold. The koruna has been one …
2nd February 2012
January’s manufacturing PMI data provide some evidence that the slump in industry in Emerging Europe’s most open economies is bottoming out. However, the Czech and Hungarian readings are still consistent with a shallow recession while manufacturing in the …
1st February 2012
Today’s estimate of 2011 GDP growth for Russia surprised on the upside, but the underlying data reveal a growing reliance on high oil prices to sustain the current rate of expansion. We continue to expect a sharp slowdown in growth over the coming years. …
31st January 2012
News that Lithuania’s economy contracted in the final quarter of last year dents the Baltic States’ image as a poster child for austerity as a means of restoring competitiveness and repairing balance sheets. … Baltic States: still the poster child for …
30th January 2012
Russia’s economy appears to have ended 2011 on a high note. Our estimates suggest that GDP grew by 5.0% y/y in Q4 – a slight improvement on 4.8% y/y in Q3. Even so, a combination of falling oil prices, tighter credit conditions and weaker external demand …
27th January 2012
Although today’s preliminary estimate of 2011 GDP growth surprised on the upside, the Polish economy slowed in the fourth quarter of last year. Poland is better placed than its neighbours to weather the fallout from Europe’s debt crisis, but it is still …
Recent comments from central bankers suggest that inflation is still high on the list of concerns for policymakers in the region. However, the unwinding of the last year’s commodity price shock, coupled with a slowdown in growth, should ensure that …
26th January 2012
The improvement in global risk appetite seen in recent weeks has ensured that financial markets across Emerging Europe have enjoyed a decent start to 2012. Yet we remain doubtful that this rebound can be sustained. After all, despite some glimmers of hope …
25th January 2012
The National Bank of Hungary (NBH) kept interest rates on hold today on the back of easing strains in the financial markets. This has come against the backdrop of talks with the IMF and EU apparently getting back on track, coupled with a general recovery …
24th January 2012
Despite the recent rally in the lira and signs that Turkey’s current account deficit is starting to narrow, the reduction in effective interest rates seen over the past few weeks is likely to prove temporary. We expect market interest rates to return to …
This is the first edition of our new monthly publication Emerging Europe Watch. This will summarise the major talking points in the region and preview key data and events. In this issue we look at Hungary’s debt crisis – and explain why we think things …
18th January 2012
Yesterday’s “Vienna Initiative” meeting adds to our fears that euro-zone policymakers are now less willing to step in to help Emerging Europe than in 2008/09. Of course, much depends on how events pan out in the euro-zone, but we remain of the view that a …
17th January 2012
In a Focus piece last month we outlined three possible ways in which the political situation in Russia might develop. Although it is still too early to say with any certainty how events will play out, all the signs are that our central scenario is …
The recent sell-off in Hungarian assets has turned the spotlight on other Emerging European assets. Even though any contagion risks are likely to be limited, 2012 promises to be a tough year for the region’s currencies and stock markets due to its banking …
12th January 2012
On the face of it, the most recent Turkish balance of payments data are encouraging. The current account deficit appears to be narrowing, while capital inflows have held up. But underlying this is the fact that the balance of payments is adjusting via a …
11th January 2012
Talks between Hungary and the IMF are now underway. And with recent comments from the government suggesting that it has discarded its objections to accepting IMF help, market sentiment has improved considerably. But while we think a deal will ultimately …
10th January 2012
A raft of data released over the past week paints a mixed picture for the Emerging Europe’s industrial sector. But even though production held up relatively well in the last months of 2011, weak survey data suggest it is on track to slow markedly in the …
9th January 2012
The National Bank of Romania (NBR) cut its benchmark interest rate today, as expected. Crucially, stable politics and an IMF backstop have provided the NBR with scope to cut rates in response to the deteriorating growth outlook. In contrast, the absence …
5th January 2012
With the forint falling to a record low against the euro today, the news from Hungary goes from bad to worse, coming on the back of the breakdown in negotiations with the IMF and EU last month, a credit rating downgrade to junk, rising bond yields and …
4th January 2012
Over the past week, the Turkish Central Bank (CBRT) has used above-target and rising inflation to justify further measures to tighten monetary policy. However, we think the threat of a disorderly balance of payments adjustment has been the major concern …
3rd January 2012
The eruption of anti-government protests in Russia has come at a time of growing strains in the country’s consumption-led growth model. But while hopes for reform are rising, the paradox facing investors is that these are more likely to gain traction …
20th December 2011
The National Bank of Hungary (NBH) hiked interest rates today, as expected. But with the government at loggerheads with the central bank, talks with the IMF seemingly having broken down and fresh signs of strains in the bond market, we think it would …
The past month has brought further evidence – if any were needed – that Emerging Europe will not escape unscathed from the gathering storm in the euro-zone. Unsurprisingly, perhaps, the region’s most export-dependent economies have so far been hit the …
19th December 2011
Headline inflation has picked up across much of Emerging Europe. But we don’t think this threat is as big as some commentators are suggesting since underlying inflationary pressures are subdued. With the growth outlook deteriorating, we have still …
14th December 2011
On the face of it at least, the latest rise in inflation in Central Europe is deeply worrying, not least since it has come against a backdrop of slowing growth. But a closer look at the data reveals that the pick-up in inflation has been driven by the …
13th December 2011
The Central Bank of Russia (CBR) has cut the amount of funds it provides via its overnight repo auctions to the lowest level in almost two months in an attempt to shore up the ruble against a backdrop of increasing political unrest. But while this – along …
12th December 2011
Today’s Q3 GDP data surprised on the upside but, as we expected, domestic demand slowed much more sharply than the headline GDP growth rate. The key point though, is that today’s data do not yet reflect the effects of monetary tightening seen since late …
Turkish Q3 GDP data, due next week, are likely to show that the economy slowed to around 5.5% on an annual basis and contracted over the quarter on the back of weaker domestic demand. But, crucially, this does not yet reflect the impact of tighter …
8th December 2011
We broadly agree with the consensus view that most emerging economies will hold up well in 2012. But with the US set to slow and the euro-zone heading towards break-up, the path ahead is going to be bumpy. Here are five developments that emerging market …
7th December 2011
The deepening turmoil in the euro-zone is likely to drag large parts of Emerging Europe into recession over the next year. Financial sector vulnerabilities mean that recession risks are greatest in Hungary, Ukraine and the Balkans – indeed, in the …
The blow to United Russia in the parliamentary elections means that Putin’s absolute control over Russian politics has weakened. The question now is whether this can act as a trigger for reform as Mr Putin seeks to restore his popularity. While the …
5th December 2011
November’s manufacturing PMI data brought further evidence – if any was needed – that the more open economies in Emerging Europe are following their Western European neighbours into recession. Even Polish manufacturers, which have so far escaped …
1st December 2011
Polish growth surprised on the upside in Q3, reinforcing the view that the economy is relatively well placed to weather the storm brewing in the euro-zone. But while Poland is less vulnerable to a renewed recession in Europe than its peers, it is not …
30th November 2011
If this afternoon’s 50bps hike in Hungarian interest rates was intended to shore up the forint, the move has flopped. But in truth it was always likely that a far larger increase would be needed to strengthen the currency. With the euro-crisis set to …
29th November 2011
This morning’s decision by the Central Bank of Russia (CBR) to keep its key interest rates unchanged was expected, but the accompanying statement suggests that policymakers are becoming increasingly worried about a liquidity squeeze in the banking sector. …
25th November 2011
We think that Russian inflation will hit a record low of 5.5% next year. Nevertheless, persistent capital outflows mean that monetary easing is off the cards for now. … Russian inflation to touch record …
24th November 2011
Austria’s decision to restrict lending by its banks to subsidiaries in Emerging Europe reflects a broader shift in sentiment on the part of Western banks away from supporting units further east. This in turn makes Emerging Europe more vulnerable should …
23rd November 2011
The Turkish central bank (CBRT) left its benchmark policy rate on hold today as expected, but the crucial point is that interest rates have already been hiked, albeit via the backdoor. Tighter monetary conditions are another reason to expect the Turkish …
Despite the deepening crisis in the euro-zone, data released over the past month showed that growth accelerated in a number of countries in Emerging Europe in the third quarter of this year. Yet while Q3 GDP data were a welcome surprise, the monthly …
22nd November 2011
It appears that Hungary’s efforts to re-engage with the IMF have run into trouble sooner than even we had anticipated. While much still remains uncertain, the government’s decision to announce it was seeking IMF assistance without first discussing it with …
18th November 2011
News that Hungary will commence talks with the IMF on a “new type of cooperation” is clearly a positive step following the turmoil seen in local markets over the past couple of weeks. The forint has rallied by 2.5% against the euro since the announcement, …
17th November 2011
