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CBRT underwhelms with rate hike, but communications provide room for hope The 650bp interest rate hike by Turkey’s central bank today (to 15.0%) will underwhelm investors that wanted a faster and more aggressive monetary tightening. But the communications …
22nd June 2023
This page has been updated with additional analysis since first publication . Economy continues to struggle May’s industrial production and retail sales data out of Poland were weaker than expected and are consistent with our forecast that GDP growth …
Click here to read the full report. Overview – Downturns in activity are bottoming out in Emerging Europe, current account deficits are narrowing and disinflation has taken hold across the region. But the road ahead still looks challenging. We expect GDP …
21st June 2023
This page has been updated with additional analysis since the post-meeting statement and press conference. Hawkish CNB will turn dovish by year-end The Czech National Bank (CNB) left its main policy rate on hold again today, at 7.00%, and the hawkish …
Governments in Turkey and Nigeria have started to turn away from unorthodox economic policies in recent weeks, and in both cases currencies have been allowed to move closer to fair value. The key thing to watch next is whether central banks in both …
This page has been updated with additional analysis since first publication. MNB leading the EM cutting cycle Hungary’s central bank (MNB) announced a cut to its one-day quick deposit rate (the key policy rate at the moment) by 100bp, to 16.00%, today. We …
20th June 2023
PiS adding further fuel to the inflation fire The Polish government set out plans this week to increase the national minimum wage by around 20% again next year. With the labour market still very tight and further pre-election fiscal stimulus likely to be …
16th June 2023
The Polish government’s ambitious plans to raise defence and social spending are unlikely to be achieved without pushing up the public debt-to-GDP ratio later this decade. Imminent risks to the sustainability of the public finances still appear relatively …
13th June 2023
Activity growing at a more subdued pace The latest industrial production and retail sales data for Turkey for April suggest that GDP growth is likely to have remained subdued this quarter following the Q1 slowdown. A shift towards economic orthodoxy – …
Inflation ticks up as central bank sounds hawkish Russian inflation picked up slightly to 2.5% y/y in May and we think it will rise above the central bank’s 4% target in the coming months. Against a backdrop of large upside inflation risks and the hawkish …
9th June 2023
Turkey embraces orthodoxy, but for how long? Optimism about a shift towards orthodox economic policymaking was at the heart of developments in Turkey this week amid the appointments of a new cabinet and central bank governor and a sharp fall in the lira. …
CBR turns its hawkish rhetoric up a notch Russia’s central bank left rates on hold at 7.50% as expected today, but delivered an even more hawkish message as it said that pro-inflation risks have increased further and that it will consider the need to hike …
A version of this report was published as an opinion piece in the Financial Times on Wednesday 7 th June Signs that newly re-elected Turkish president Erdogan is willing to move away from unorthodox economic policies has led to an increase in investor …
7th June 2023
NBP remains on pause The National Bank of Poland (NBP) left its main policy rate on hold again today, at 6.75%, and we think that rates will remain unchanged for at least the next few meetings. While we maintain our forecast that interest rates will be …
6th June 2023
Optimism about a shift towards more orthodox economic policymaking in Turkey has taken hold following the appointment of Mehmet Simsek to the cabinet this weekend. Recent developments look encouraging but the next big test will be whether President …
5th June 2023
Energy drags headline inflation lower The fall in Turkish inflation to 39.6% y/y in May was largely driven by a sharp fall in energy prices, while core inflation increased . Bringing inflation down sustainably will require a major policy tightening and …
Optimism building about policy shift in Turkey All the attention in Turkey this week has been on whether President Erdogan will moderate his economic policies now that he has secured another five-year term. The latest signs of an improvement in …
2nd June 2023
The re-election of President Erdogan has raised concerns about a possible sovereign default. We think this risk looks low for now, but it would become a bigger threat in the coming years if the current policy mix continues, macro imbalances worsen and …
1st June 2023
PMIs stabilise, but growth to remain tepid The manufacturing PMIs for May across Emerging Europe were either flat, or edged up slightly, providing further evidence that the worst of the regional downturn is probably now behind us. That said, the PMIs …
Economic momentum sustained at the start of Q2 The continued growth of Russian industrial production and retail sales in April suggests that the strength of activity seen in Q1 continued at the start of Q2. This momentum is likely to be sustained in the …
31st May 2023
There has been further evidence over the past month that resilient export growth, weak domestic demand and lower energy prices have helped to improve current account positions across Central and Eastern Europe this year. This has been particularly …
Solid Q1, but economy set for slowdown in growth Turkey’s economy shrugged off the impact of the earthquakes in February and grew by 0.3% q/q (4.0% y/y) in Q1. GDP growth is likely to remain soft in q/q terms this year, but a continuation of President …
Turkish economy’s day of reckoning may now just be around the corner The victory for President Erdogan in Turkey’s presidential election on Sunday is likely to result in a continuation of distortive economic policies and push the economy down a path …
29th May 2023
Attention focusing on financial stability in Turkey With the second round vote of Turkey’s presidential election taking centre stage on Sunday, the day of reckoning for Turkey’s economy and financial markets may now just be around the corner. The …
26th May 2023
President Erdogan looks set to secure victory in the second round of Turkey’s presidential election on 28 th May. This Update sets out how we think this would play out in Turkey’s financial markets this year: in short, we think that measures of Turkey’s …
25th May 2023
Hopes for CBRT rate hikes are evaporating Turkey’s central bank (CBRT) left its key policy rate on hold at 8.50% again today and, with Recep Tayyip Erdoğan in pole position to be re-elected as Turkey’s President this Sunday, the probability of much-needed …
Hungary’s central bank (MNB) cut the interest rate on its one-day deposit tender at today’s meeting, from 18% to 17%, and this is likely to be followed by further cuts in the coming months, with the central bank’s key policy rates returning to single …
23rd May 2023
MNB inching closer to an easing cycle Hungary’s central bank (MNB) left its base rate on hold at 13% as expected today and the post-meeting communications are likely to provide guidance on when the overnight daily deposit rate of 18% will be cut, which …
Activity continues to struggle Industrial production and retail sales data for April for Poland were generally on the weak side and suggest that the economy lacked momentum at the start of Q2. We think activity will soon bottom out, but the prospect of a …
The Bank of Israel (BoI) delivered another 25bp interest rate hike, to 4.75%, at today’s meeting and did not offer any guidance as to whether this would be the last in the cycle. On balance, we think the central bank will deliver one more 25bp hike, to …
22nd May 2023
Erdogan in pole position for the presidency Sunday’s presidential election result in Turkey was all about Erdogan. He gained more than 49% of the vote share after some of the more reliable polls last week had opposition candidate Kemel Kilicdaroglu at …
19th May 2023
Over the past couple of weeks we have held a series of roundtable discussions with clients across Asia and North America on the outlook for EMs. In this Update we provide our thoughts on the recurring questions that we received, including on China’s …
Economies across Central and Eastern Europe (CEE) have significantly underperformed the euro-zone and the rest of the world in recent quarters, which has its roots in the scale of the inflation shock that the region suffered and the impact on domestic …
18th May 2023
Q1 acceleration, on track for full-year growth The smaller-than-expected 1.9% y/y contraction in Russian GDP in Q1 suggests that the economy has turned a corner and that growth accelerated in q/q terms at the start of this year. Industry and retail sales …
17th May 2023
Economy slowing, but growth remains solid GDP growth remained fairly solid in Israel in Q1 (2.5% q/q annualised) as it came in slightly above expectations thanks to an unexpected surge in business investment. We think growth will come in below potential …
16th May 2023
Downturns ease, but growth to remain weak Q1 GDP data for Central and Eastern Europe were fairly weak, but Poland’s economy beat expectations and the worst of the regional downturn appears to have passed. Even so, headwinds remain strong and a sustained …
Turkey’s presidential election on Sunday was close, but Erdogan performed better than recent polls had suggested and he now has the edge ahead of a second round run-off on 28 th May. Hopes of an opposition victory and a return to orthodox policymaking …
15th May 2023
Better showing for Erdogan, now in the driving seat for victory Turkey’s presidential election this weekend was incredibly tight and looks to have produced no clear winner, but President Erdogan performed better than recent polls had suggested and this …
Inflation hits a new multi-year low Russian inflation continued to defy expectations in April as it slumped to a joint three-year low of 2.3% y/y, which will comfort the central bank . But it is a puzzle as to why inflation pressures remain so soft. We …
12th May 2023
Czech government tightens the purse strings The Czech government’s long-awaited fiscal consolidation package this week will include fiscal tightening of around 1.5% of GDP over 2024/25 which will come at the cost of weaker growth. But this appears to be a …
Activity bounces back after earthquake disruption Industrial production and retail sales bounced back strongly in March, supporting our view that the impact of the earthquakes was short-lived. GDP growth is likely to have remained positive in Q1. But the …
Rates on hold, window for cuts this year narrows Poland’s central bank (NBP) left its main policy rate on hold as expected again today, at 6.75%, and we think there is a small window for rate cuts by year-end. But with core inflation proving sticky and …
10th May 2023
Disinflation process largely on track, rate cuts in 2024 Romania’s central bank (NBR) left its policy rate on hold as expected today, at 7.00%, and we think that it will keep policy rates unchanged throughout this year. Interest rate cuts are likely to …
Note: We discussed Turkey’s election in an online briefing on 10th May. Watch it here . There’s a lot of optimism that the opposition will emerge victorious in Turkey’s elections, which would pave the way for a return to orthodox economic policy. Were …
Note: We’ll be discussing the economic and market risks around the upcoming Turkish presidential and parliamentary elections on at 09:00 EDT/14:00 BST on 10 th May . Register now. Turkey’s election race heats up Opinion polls are now painting a clearer …
5th May 2023
The idea of a new BRICS currency to settle trade or hold in reserves instead of the dollar has been doing the rounds recently. This could be modelled on the IMF’s Special Drawing Rights. But getting India on board with China would be difficult. And if the …
4th May 2023
Economy posts strong growth in activity in Q1 Industrial production and retail sales continued to recover strongly in Russia in March and suggest that GDP growth may have accelerated in Q1. The economy appears to be receiving a boost from the recent surge …
3rd May 2023
The Czech central bank (CNB) left its main policy rate on hold at 7.00% as expected today, but it looks like policymakers set out to strengthen their hawkish rhetoric and downplay expectations of an imminent cut in interest rates. The message was loud and …
Note: We'll be discussing Turkey's election in an online briefing at 09:00 EDT/14:00 BST on 10th May . Register here . Parliamentary and presidential elections on 14 th May will make or break macroeconomic stability in Turkey. As things stand it looks …
CNB still on pause, but cuts not far away The Czech National Bank (CNB) left its main policy rate on hold again today, at 7.00%, but we think that interest rate cuts are not far away, with policymakers likely to kickstart the loosening cycle in September. …
