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The relative stagnation in Russian oil production over the past few years has long been a concern for policymakers. However, it seems unlikely that the new, more favourable, tax regime for Russian oil companies will, as some have argued, lead to a marked …
16th November 2011
The raft of third quarter GDP data released today contained some positive surprises – notably stronger than expected growth in Hungary and Romania. But given the speed at which the euro-crisis has escalated in recent months, today’s data are already old …
15th November 2011
The deepening crisis in the euro-zone has led to a marked deterioration in the outlook for growth across Emerging Europe, but it will bring a range of different responses from policymakers in the region. At one extreme, in Hungary perennial concerns about …
14th November 2011
Data released today show that the Russian economy grew by a fraction under 5% y/y in the third quarter of this year, but leading indicators are already pointing to a slowdown in Q4. Meanwhile, the noose is tightening in Hungary following another failed …
The apparent resilience of the three Baltic economies continues to surprise. Data released over the past week show that Estonia grew by a solid 7.9% y/y in Q3, while growth edged up to 5.7% y/y in Latvia and to 6.6% y/y in Lithuania – all above consensus. …
11th November 2011
Fears are mounting over the exposure of Emerging Europe’s banks to the deepening crisis in the euro-zone. Our view remains unchanged from that which we put forward earlier this year: the big risk to the region’s banking sector is not that West European …
10th November 2011
With the Czech economy already slowing on the back of weaker growth in its key export markets, the case for policy stimulus is mounting. In the first instance, we expect a 25bp interest rate cut, probably before the end of this year, followed perhaps by …
9th November 2011
News that an IMF mission left Kiev late on Friday without approving the resumption of Ukraine’s $15bn programme has pushed the country a step closer to an external funding crisis. … IMF impasse pushes Ukraine closer to the …
7th November 2011
October’s manufacturing PMI data came in stronger than expected in most of Emerging Europe. Nevertheless, this does not hide the fact that hard data are weakening. On a quarterly basis, it appears that Turkish and Russian industry stagnated in Q3, while …
2nd November 2011
After nearly 20 years of negotiations, Russia now appears to be on the cusp of joining the WTO. But while in theory at least WTO membership could bring major economic benefits, in practice these will only be achieved if accession acts as a spur for …
31st October 2011
Financial markets in Emerging Europe have rebounded following this summer’s turmoil. Equity markets (Turkey aside) have rallied by around 8% or more this month, while the region’s currencies have appreciated by a similar amount against the euro. However, …
28th October 2011
Today’s move by the Central Bank of Turkey to suspend its 7-day repo auction and force banks to instead access finance via its overnight window amounts to a backdoor interest rate hike of as much as 675bps. … Turkish Central Bank tightens the …
27th October 2011
Russia’s Central Bank (CBR) is in a bind. While recent liquidity shortages in the banking sector and an improved outlook for inflation argue in favour of monetary easing, the weak ruble and persistent capital outflows will continue to keep the bar for …
26th October 2011
The rally in financial markets in Central Europe over the past few weeks is all the more notable since it has taken place against a backdrop of worsening economic data. We expect growth in Poland and the Czech Republic to slow sharply next year and now …
25th October 2011
Although financial markets have recovered a little this month, the activity data from the region has continued to soften. Yet in pretty much every country, policymakers have less scope to stimulate growth than they did during the 2008-09 recession. …
22nd October 2011
Although the Turkish Central Bank (CBRT) kept the benchmark repo rate on hold, today’s MPC meeting marked a clear shift in its stance. Policymakers are no longer in easing mood are moving instead towards preventing a disorderly adjustment in the lira. … …
21st October 2011
Emerging markets are not immune from the deepening debt crisis in the developed world, but most are well-placed to deal with the fallout. China faces a difficult structural transition of its own but, along with the rest of emerging Asia, has policy …
The raft of activity data for September released earlier today allow us to firm up our forecast for Russian growth in the third quarter. The good news is that the economy appears to have expanded at a decent annual pace of 4.5%-5.0%. But forward looking …
20th October 2011
Fears that the recent sell-off in Emerging Europe’s currencies might lead to a pick-up in inflation and put pressure on policymakers to raise interest rates are overstated. Nevertheless, weaker currencies will increase concerns over financial stability in …
19th October 2011
A hefty external financing requirement is casting a long cloud over the economic outlook for Ukraine. With limited access to private capital, the government will soon have no other option but to turn to the IMF. However, given the high political costs, we …
15th October 2011
While Turkey’s Medium-Term Programme (MTP) for 2012-14, unveiled today, contains some movement towards fiscal tightening, we think that it is a case of too little too late. The MTP is based on overly-optimistic assumptions and will not do enough to reduce …
14th October 2011
Russian markets have been hit hard during the recent financial market turmoil: the RTS equity index was down by 18% in September and the ruble lost 10% against the dollar. While the currency and equities now look oversold, we do not expect any rebound to …
The view that Emerging Europe is not as vulnerable to an external financing crisis as in 2008/09 appears misplaced. Although current account deficits have, in most cases, narrowed sharply, total external financing requirements (including external debt …
13th October 2011
Victory for the governing Civic Platform Party in yesterday’s parliamentary elections in Poland will be welcomed as a sign of business as usual by the markets. But with external headwinds building and little room for policy stimulus at home, we fear that …
11th October 2011
Fresh concerns over the health of the Hungarian banking system have risen following the government’s policy to allow households to repay FX mortgages at preferential exchange rates. Our best estimate is that banks should be able to absorb this without a …
6th October 2011
With elections due on Sunday, the campaign of the governing Civic Platform party has understandably focussed on its economic credentials. After all, Poland was the only country in the EU to avoid recession in 2009. Yet in many respects the Polish economy …
5th October 2011
September’s PMI surveys confirmed that manufacturing growth across the region has stalled. With export-led industry being the main (and in some cases only) driver of growth, this adds further weight to our below-consensus view of the region’s growth …
4th October 2011
In light of recent events, this Update provides a brief snapshot of the health of Russia’s public finances. The short point is that while public debt is very low, the budget position is increasingly unsustainable. … Russia's balance sheet …
30th September 2011
The past couple of days have seen a rebound in the region’s financial markets, but this has reversed only a fraction of the losses seen over the past month. Most equity markets, for example, are still down by around 10% on the start of September, and …
29th September 2011
This weekend’s news that current President Medvedev will step aside to allow Vladimir Putin to run for the presidency at next year’s elections has raised hopes that lower political uncertainty will help to ease capital flight from Russia. In reality, …
27th September 2011
The latest turmoil in markets and the rapidly deteriorating outlook for global and regional growth mean that fears about rising inflation, which dominated the policy debate over the first half of this year, are now a distant memory. Instead, the focus has …
24th September 2011
The vast bulk of growth in Emerging Europe since the fall of communism can be explained by the better allocation of resources that has resulted from the transition from central planning to a market economy. However, the most important lesson from the past …
22nd September 2011
September’s activity data suggest that Russia is heading for a strong economic performance in the second half of 2011. What’s more, with both the consumer sector and industry picking up, growth looks set to be more broad-based. We estimate that GDP …
20th September 2011
The outlook for inflation in Hungary is not as bad as recent developments suggest, but the plunging forint may still force the National Bank into a defensive rate hike within the next three months. … Should we be worried about inflation in …
The deepening crisis in the euro-zone reinforces our view that growth in Emerging Europe will slow by more than most expect over the next year. We expect the region’s economy as a whole to expand by just 1.8% in 2012, which encompasses a recession in …
16th September 2011
Today’s decision by the Central Bank of Russia (CBR) to lower its overnight repo rate and at the same time raise its overnight deposit rate is an attempt to wrest back control over market interest rates, and may be a sign that policymakers are preparing …
15th September 2011
On the face of it, Turkish Q2 GDP data – which surprised on the upside – is positive news. However, it merely confirms our view that the Turkish economy is overheating and it is now more likely than not that a period of good growth will end in recession. …
13th September 2011
July’s Industrial production data, although not as bad as feared, were poor nonetheless and confirmed that growth is weakening across Central and Eastern Europe. What’s more, the disappointing PMIs for August released last week coupled with the slump in …
10th September 2011
The Polish central bank’s decision to leave interest rates on hold comes as little surprise given the recent signs of a domestic slowdown and lower demand from abroad. With inflation set to ease further in the coming months, we think the Bank’s next move …
8th September 2011
The Hungarian government yesterday afternoon announced measures to raise an extra HUF 100bn in revenues as lower than expected growth reduced the chances of meeting the budget target. The government also announced more cautious growth forecasts on which …
The Swiss National Bank’s decision to effectively peg the Swiss franc to the euro will provide some qualified relief to Croatia, Hungary and Poland, which have significant amounts of Swiss franc debt. However, compared with the rates at which many of …
7th September 2011
Turkey’s economy looks increasingly in danger of going from boom to bust. Rapid growth in domestic demand has led to a surge in imports and a widening current account deficit that, in light of recent market turbulence, looks increasingly unsustainable. We …
3rd September 2011
August’s PMI surveys brought further evidence – if any were needed – that industry in Central and Eastern Europe is slowing sharply. Given that this has been the main driver of growth over the past year or so, it’s becoming increasingly difficult to …
2nd September 2011
Polish growth in Q2 remained relatively robust but we expect it to slow significantly in 2012 and 2013 to a below-consensus 3% y/y as external headwinds build. Having front-loaded monetary tightening this year, the central bank has scope to loosen policy …
31st August 2011
At first sight Russia’s public finances appear a picture of health when compared to those in the developed world. But a growing dependence on high and rising oil prices as a source of revenue is a major, and often overlooked, vulnerability. Indeed, out …
26th August 2011
Growth clouds are gathering over Emerging Europe. Leading indicators, such the manufacturing PMIs, have weakened across the board, growth in key export markets (notably Germany) is cooling and Q2 GDP data released over the past month suggest that the …
25th August 2011
Turkish policymakers left interest rates unchanged today, but hinted that further policy loosening may be on the way. Yet even if additional stimulus is ultimately justified by a renewed downturn in the world economy, Turkey’s large current account …
24th August 2011
This report is only available as a PDF. Click to download. … Case for rate cuts set to strengthen …
19th August 2011
Today’s Q2 GDP data show that the pace of recovery across the region was slowing even before the recent turmoil in financial markets. With external demand weakening and domestic demand still subdued, we remain comfortable with our below consensus …
17th August 2011
In the wake of the recent market turmoil, the immediate priority for policymakers is to stabilise the region’s currencies. But if required central banks are more likely to rely on verbal or direct intervention in the foreign exchange markets than …
13th August 2011
