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The bulk of the region is now experiencing a strong rebound in manufacturing, with Slovakia and Turkey at the head of the pack and Romania lagging behind. The key, however, is whether the recovery in industry will spread to other sectors. For now, with …
8th June 2010
We expect currencies across most of Emerging Europe to weaken further against both the euro and US dollar over the next year or so. The Romanian leu looks likely to be the worst performer, while the Turkish lira should do best. … Can Eastern European …
4th June 2010
The recent elections in the Czech Republic appear to have produced a strong centre-right coalition, which will step up efforts at tackling the public deficit. But the looming fiscal squeeze adds to the economic headwinds, and we now expect interest rates …
1st June 2010
Manufacturing PMIs from across the region remain consistent with continued strong growth in industrial production over the coming months. The problem, however, is that there is still little sign of the impressive bounce in manufacturing has begun to …
The proposed appointment of Marek Belka, a well-respected, pro-market economist, as the new Governor of the National Bank of Poland is not yet a done deal. But regardless of who takes over at the helm of the NBP, interest rates will remain unchanged for …
27th May 2010
Hungary’s new government has got off to a disappointing start, with early signs suggesting that economic populism will take priority over much-needed fiscal reform. … Worrying early signs from Hungary’s new …
26th May 2010
Estonia’s low level of public debt sets it apart from the heavily indebted countries on the periphery of the euro-zone. But the country has seen a much bigger erosion of its competitive position over the past few years. An extremely painful period of …
25th May 2010
First quarter GDP data, released by most countries over the past month or so, paint a mixed picture. The highly open economies of Central Europe – notably Slovakia – continue to rebound at a fairly impressive pace. The Hungarian economy also grew at a …
The surge in Russian industrial production growth in April is not quite as good as it appears at first sight since it is flattered by base effects stemming from the collapse in activity last year. In annual terms at least, industrial production growth is …
19th May 2010
Concerns that the new government in Hungary will jeopardise the independence of the National Bank appear to be coming to fruition. While much remains uncertain, it seems clear that PM Orban will now seek to remove Governor Simor, who is well respected in …
18th May 2010
Russia’s public finances are a picture of health compared to those economies in the euro-zone’s periphery. But if oil prices drop further, as we expect, spending may have to be cut in real terms for the next five years in order to meet the government’s …
Q1 GDP data released this morning from across Emerging Europe paint a mixed picture. While the economies in Central Europe all grew on a quarterly basis, those in Southern Europe contracted once again. Given the significant and ongoing headwinds to …
12th May 2010
Today’s announcement that Estonia will join the euro-zone owes much to the huge fiscal tightening enacted last year. But EMU-entry will not be a panacea for the economy, and we expect GDP to contract once again this year. … Estonia given green light to …
Today’s announcement of a seemingly well-designed and sensible fiscal rule in Turkey is an encouraging sign that the government is trying to get to grips with the public finances. But while a rules-based framework can help to instil fiscal discipline, …
11th May 2010
March’s industrial production data from Turkey round off an impressive start of the year for the economy. In light of other positive data releases over recent weeks, we have raised our GDP forecast to 6.5% this year (from 4.0% previously). … Turkey: on …
10th May 2010
Despite the recent jump in Bulgaria’s budget deficit, the fiscal risks are comparatively modest. Nonetheless, the economy still faces a tough time ahead, and we expect it to contract again this year. … Tough year lies ahead for …
7th May 2010
Today’s surprise interest rate cut in the Czech Republic reflects the ongoing lack of underlying inflation pressures in the economy, and lends further support to our view that rates are likely to remain at record lows until well into 2011. … Czech …
6th May 2010
While the National Bank of Romania appears to be reaching the end of its current easing cycle, with the economic recovery still facing significant headwinds, rate hikes remain a distant proposition. … Where now for Romanian interest …
5th May 2010
Concerns over the deepening crisis in Greece have weighed on financial markets across the region over the past couple of weeks. While no country has escaped, the contagion risks appear greatest in Bulgaria and Romania, where financial linkages with Greece …
30th April 2010
Today’s 25bp interest rate cut in Russia will do little to spur lending in the real economy. And while policymakers are likely to cut interest rates further in the near-term, there is a good chance that recent cuts will be reversed in the second half of …
29th April 2010
Financial markets across the region have been hit by the latest developments in Greece, but contagion risks are greatest in Bulgaria, Romania and Hungary. … Assessing the contagion risks from …
28th April 2010
The markets’ favourable reaction to Fidesz’s landslide election victory in Hungary will have been a key factor behind today’s decision by the National Bank (NBH) to cut interest rates by 25bps to 5.25%. Assuming that Fidesz can keep the markets’ …
26th April 2010
Attempts by Czech policymakers to stem the recent rise in the koruna may have some effect at the margin, but we doubt that they will do much to fundamentally alter the value of the currency. In the end, however, with investor risk appetite likely to wane …
22nd April 2010
Today’s gas deal with Russia is undoubtedly a boost for the Ukrainian economy’s near-term prospects, and keeps it on course for an impressive bounce back this year. But with the new government yet to tackle underlying economic problems, medium-term risks …
21st April 2010
The pace of Russia’s recovery is likely to fade and the ruble is likely to weaken if, as we expect, oil prices fall back over the next year or so. … Concerns over a strong ruble unlikely to …
In the absence of a new IMF programme, a fiscal rule could help to reassure markets that Turkey remains committed to maintaining fiscal discipline. But even a well designed fiscal rule requires political backing in order to be effective. And a poorly …
19th April 2010
Both Poland and the Czech Republic are set to announce new Central Bank governors over the coming months. But we suspect this will do little to alter the policy bias in either country. Poland will be amongst the first in the region to tighten monetary …
15th April 2010
Earlier today the Central Bank of Turkey (CBRT) outlined its exit strategy from the additional liquidity measures it introduced during the economic crisis. These include plans to switch to a new benchmark interest rate. The key point, however, is that any …
14th April 2010
A series of policy announcements that are due over the next week or so, including a draft 2010 Budget, should give a clearer idea of the priorities of Ukraine’s new government. Reforms in three areas will be critical to securing the country’s prosperity …
12th April 2010
The markets have welcomed Fidesz’s landslide victory in yesterday’s election in Hungary. But with a distinct lack of policy detail from the party so far, we remain only cautiously optimistic that its huge majority will translate into decisive action to …
On the whole, firms, rather than households, have borne the brunt of the credit squeeze in Emerging Europe. In fact, lending to consumers has already started to pick up in those countries with relatively healthy banking sectors. But the bigger point …
9th April 2010
Despite being richer than the rest of the so-called BRICs, there is still plenty of scope for Russia to undergo a period of rapid catch-up growth and it may yet overtake Germany as Europe’s largest economy by 2035. But this would require wholesale policy …
6th April 2010
Forthcoming elections in Hungary and the Czech Republic are likely to spotlight fiscal frailties in both countries. As ever, the risks remain greatest in Hungary. But the likelihood of a weak government means that efforts to tackle the Czech Republic’s …
31st March 2010
Q4 2009 GDP data from Turkey support our view that it will be one of the best performing economies in the region over the next few years. Nonetheless, while growth should impress in the near-term, Q4’s headline growth figure probably overstates the true …
The fact that policymakers in both Hungary and Romania are still cutting interest rates when their counterparts elsewhere in the world have begun to withdraw stimulus measures reflects the depth of the recession in both countries and the fact that adverse …
29th March 2010
Financial markets in Emerging Europe have, for the most part, brushed off sovereign debt concerns in the euro-zone’s periphery. While bond markets sold off earlier this year as the crisis in Greece reached its peak, yields on both foreign and local …
Today’s decision by the Central Bank of Russia (CBR) to cut its key interest rates by 25bps came as no surprise. But cuts in official interest rates will do little to spur lending in the real economy. The more important point is that, as things stand, the …
26th March 2010
The Czech National Bank kept interest rates unchanged at 1.00% this afternoon. But while the markets expect a first rate hike in the third quarter of this year, we do not expect interest rates to be raised until the middle of next year. … Czech rates to …
25th March 2010
The deterioration in the growth outlook for the euro-zone adds to the substantial headwinds already facing the recovery in Emerging Europe. We have nudged down our 2011 GDP forecasts for Slovakia and the Czech Republic, in response to a downgrade in our …
Despite the recent improvement in Hungarian retail sales and wage data, domestic demand will continue to weigh on growth in the near-term. All told, we expect the economy to contract once again this year, and for its recovery to lag well behind the rest …
23rd March 2010
Market rate expectations have edged down in recent weeks, but we still think that the pace of tightening currently priced in for most countries in the region is too aggressive. While inflation has picked up in some economies (notably Turkey) in recent …
19th March 2010
The collapse of Latvia’s ruling coalition earlier today underlines the difficulty of carrying out the aggressive fiscal cuts that are needed to keep the country’s IMF programme on track. … Latvia’s government left in …
17th March 2010
This report is only available as a PDF. Click to download. … Is the recovery for real? (Q1 2010) …
We have nudged up our forecast for Russian growth and the ruble for this year, partly in response to an upward revision to our profile for oil prices. But the bigger picture is that we still expect the recovery to disappoint. … Oil prices still set to …
10th March 2010
Data released today suggest that the Czech economy may be on course to return to growth in Q1 2010. Nonetheless, there remains little sign of a strong and sustainable recovery emerging, and we are sticking to our below consensus forecast for GDP to grow …
9th March 2010
In a recent Update we argued that the crisis in Greece has dealt a huge blow to the prospects for a further rapid expansion of the euro-zone (see Emerging Europe Update, ‘Greek tragedy to temper EMU expansion’, 22nd February). However, a more immediate …
4th March 2010
The collapse of Ukraine’s government earlier today may paradoxically be a positive development, but a lot of progress still needs to be made before access to IMF funding is unfrozen. Accordingly, while it is possible that the government can scrape through …
3rd March 2010
Q4 Polish GDP data released this morning confirmed an earlier preliminary estimate that the economy grew by 1.7% in 2009 and by 3.1% y/y in the final quarter of last year. But while Poland should continue to outperform its peers in the region, the current …
2nd March 2010
Q4 GDP data, released over the past month, have painted rather a mixed picture. The good news is that a number of countries, notably Russia and Poland, appear to have grown on a quarterly basis. But in Russia’s case, we suspect that this owed more to a …
25th February 2010
A combination of a massive fiscal stimulus and a boost from the inventory cycle should ensure that the Russian economy grows at annual rates in excess of 6% during the first half of this year. But the prospect of a renewed fall in oil prices later this …
24th February 2010
