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Spreads on Russian and Turkish foreign currency bonds relative to US Treasuries have moved in lockstep since October 2009. (See Chart 1.) The prospect that commodity prices (and especially oil prices) drop back again later in the year suggests that …
23rd February 2010
Some commentators think that this afternoon’s decision by the National Bank of Hungary (NBH) to cut interest rates by 25bps to 5.75% will mark the end of the current easing cycle. However, while the pace of cuts has slowed over recent months, we think …
22nd February 2010
Recent events in Greece have fundamentally weakened the economic arguments in favour of a rapid expansion of the euro-zone to include EU member states in the East. Political appetite for euro-area enlargement may also start to wane. So while Estonia may …
This morning’s 25bps cut in Russian interest rates may help to stem some of the upward pressure on the ruble but it is unlikely to do much to spur lending. What’s more, if oil prices fall back this year, as we expect, near-term concerns about currency …
19th February 2010
Although inflation has risen across much of the region in recent months, policymakers remain in no rush to raise interest rates. For a start, the bulk of the pick-up in inflation has been caused by tax hikes (primarily on alcohol and tobacco) and base …
18th February 2010
After shrinking markedly from the levels seen in mid-2008, Turkey’s current account deficit has begun to widen once again. While the deficit has not yet reached danger levels, the bigger picture is that in the absence of reforms to boost domestic saving, …
17th February 2010
As expected, the replacement of Poland’s entire Monetary Policy Council (MPC) which was completed today is unlikely to mark a fundamental shift in the Council’s bias. As a result, we are sticking to our view that interest rates will remain on hold until …
16th February 2010
The flurry of Q4 GDP data released this morning paint a pretty grim picture. Most countries, with the notable exception of Slovakia, appear to have contracted on a quarterly basis and there is little here to change our view that the recovery in Emerging …
12th February 2010
While there are tentative signs that credit conditions are starting to ease in parts of the region, the improvement has so far been confined to those countries with relatively healthy banking sectors – most notably Poland and Turkey. Elsewhere, however, …
10th February 2010
Exit polls suggest that Viktor Yanukovich has defeated Prime Minister Yulia Tymoshenko in the race to become Ukraine’s next President. But his margin of victory in yesterday’s run-off was slim and the result is now likely to be contested in the courts. …
8th February 2010
Russian inflation fell to its slowest rate in nearly three years in January. With the recovery set to lose steam over the coming quarters, we expect inflation to fall to record lows later this year. … Russian inflation heading for record …
4th February 2010
This morning’s decision by the National Bank of Romania (NBR) to cut interest rates by 50bps to 7% is testament to the more stable political outlook that has emerged since the end of last year. With the IMF/EU programme back on track, and the leu …
3rd February 2010
The sharp rise in Turkish inflation last month was due largely to one-off factors and does nothing to change our view that the aggressive interest rate hikes now priced into the market are unlikely to materialise. Core inflation pressures remain subdued …
Preliminary GDP data released today suggest that the Russian economy had a strong finish to 2009 and mean that GDP growth could top 6% y/y in the first half of this year. However, with the price of oil expected to fall in H2 2010, we suspect that the pace …
1st February 2010
Inflation across much of Emerging Europe has risen in recent months. Nonetheless, there are good reasons to think that these rises will be short-lived. For a start, the pick-ups have been driven largely by energy inflation, stemming in part from the base …
29th January 2010
A preliminary estimate of 2009 GDP released this morning suggests that despite the turmoil in the global economy, Poland managed to grow by 1.7% last year. But while the Polish economy should continue to outperform its peers in the region, the next couple …
28th January 2010
The outlook for Turkish stocks is brighter than for other equity markets in Emerging Europe. Absolute gains this year will be limited by waning risk appetite, but relative outperformance seems likely. … How will Turkey’s stock market fare in …
The sell-off in Russian markets over the past week or so has served as a timely reminder that they are the most vulnerable in the region to shifts in global risk appetite. We expect both the ruble and Russian equities to fall further over the course of …
27th January 2010
This afternoon’s decision by the National Bank of Hungary (NBH) to cut interest rates by 25bps to 6% suggests that policymakers will now cut rates at a slower pace than we previously thought. Nonetheless, we are sticking to our long-held view that rates …
25th January 2010
The very worst fears of a major fiscal blow-out in the run-up to Hungary’s parliamentary elections are probably overblown. But given Hungary’s comparatively high level of debt and history of fiscal profligacy, there is little room for complacency. And …
While policymakers in a number of countries have appeared less dovish of late, three factors should keep interest rates much lower than the markets currently expect. First, the pace of economic recovery is likely to disappoint. Second, despite an …
21st January 2010
As Eastern Europe limps out of recession, enthusiasm for euro accession appears to be building. In a speech yesterday, Hungarian PM Gordon Bajnai said that his country should adopt the euro ‘as soon as possible’ and, much to our surprise, Estonia looks …
20th January 2010
The worst of the downturn in Croatia may have passed but the economy is still facing an uphill struggle. We expect GDP to grow by just 0.5% this year and by 2.0% in 2011, compared to average annual growth rates of 5% between 2002 and 2008. … Croatia’s …
19th January 2010
Romania’s parliament last night agreed a series of cuts to this year’s budget that should get its IMF-led loan programme back on track. Nonetheless, the economic recovery is still likely to disappoint. … Romania: IMF loan back on track, but growth to …
15th January 2010
While the worst of the recession in Emerging Europe has passed, a fundamental lack of competitiveness will hold back the recovery in much of the region. Poland and Turkey stand out as two notable brightspots, and appear better placed to capitalise on the …
14th January 2010
This time last year, banking sectors across Emerging Europe were on the brink of collapse. Financial conditions have since stabilised, but how are the region’s banks likely to fair in 2010? In order to better assess this we have constructed a ‘Heat Map’. …
13th January 2010
Today’s inflation data from the Czech Republic should put to bed any lingering fears of a prolonged period of deflation. But with core price pressures set to remain subdued, we still think that interest rates are unlikely to rise until the final quarter …
11th January 2010
Recent quotes from leading policymakers suggesting that Turkey is in advanced talks with the IMF should be taken with a pinch of salt, particularly as negotiations have already dragged on for over a year. But while Turkey could probably struggle by …
7th January 2010
This morning’s decision by the National Bank of Romania (NBR) to cut interest rates by 50bps to 7.5% is likely to be the first of a number of cuts over the coming months. While any further political turmoil could yet hold up the easing cycle once again, …
5th January 2010
Twenty years after the fall of Communism, 2009 should have been a year to celebrate in Eastern Europe. Instead, it looks like a year to forget. The region was hit harder than any other by the turmoil that followed the collapse of Lehman’s last autumn and …
23rd December 2009
This report is only available as a PDF. Click to download. … Hungary: smaller than expected cut, but further easing to come …
21st December 2009
The markets are now pricing in relatively aggressive monetary tightening from mid-2010 in most countries in Emerging Europe but we think that three factors will keep rates much lower than investors currently expect. First, the pace of recovery is likely …
18th December 2009
This report is only available as a PDF. Click to download. … Turkish yields to rise, but default risk to stay low …
17th December 2009
This report is only available as a PDF. Click to download. … Are Austrian banking troubles a sign of things to come? …
16th December 2009
This report is only available as a PDF. Click to download. … Three challenges facing emerging markets in 2010 …
11th December 2009
This report is only available as a PDF. Click to download. … Turkey: the recovery continues …
10th December 2009
The good news is that following the turmoil earlier this year, most economies in Emerging Europe have now returned to positive growth and financial markets have bounced. The bad news is that a number of countries remain mired in recession and, for the …
This report is only available as a PDF. Click to download. … Romania: Political impasse further clouds the outlook …
7th December 2009
This report is only available as a PDF. Click to download. … Will sovereign debt concerns now shift to Emerging Europe? …
2nd December 2009
This report is only available as a PDF. Click to download. … Poland: annual GDP growth accelerates in Q3 …
30th November 2009
Q3 GDP data released earlier this month painted a mixed picture. Although much of the region has now returned to positive quarterly growth, this has been was driven by a variety of temporary factors including Western European car-scrapping schemes and …
27th November 2009
We estimate that Ukraine needs a further $7.5bn in external financing assistance next year. But with the outcome of January’s Presidential elections still uncertain, the source of this funding is not yet clear. With PM Tymoshenko seemingly in pole …
25th November 2009
This report is only available as a PDF. Click to download. … Hungary cuts again, rates heading for 5% …
23rd November 2009
This report is only available as a PDF. Click to download. … Russia: Forget the growth rates, it’s the levels that matter …
20th November 2009
After an aggressive easing of monetary policy over the past year, we now think that interest rates have troughed in Poland, Turkey and the Czech Republic. However policymakers in all three will retain their easing bias for some time, and rate hikes are …
This report is only available as a PDF. Click to download. … Turkey: Could this be the end of the easing-cycle? …
19th November 2009
This report is only available as a PDF. Click to download. … Hungary: wage growth to remain subdued …
17th November 2009
This report is only available as a PDF. Click to download. … Q3 GDP data paint a mixed picture …
13th November 2009
This report is only available as a PDF. Click to download. … Price pressures continue to fade …
11th November 2009
This report is only available as a PDF. Click to download. … Latvia: Still no sign of growth …
9th November 2009
