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Disinflation process continues, but smaller falls from here Inflation in Turkey fell a bit more than expected in April, to 43.7% y/y, driven largely by a sharp decline in energy inflation, but m/m price growth remained strong and the disinflation process …
3rd May 2023
The 0.1% q/q expansion in Czech GDP in Q1 means that the economy avoided remaining in a technical recession by the skin of its teeth, but we think that growth will still disappoint consensus expectations this year. Meanwhile, the manufacturing PMIs for …
2nd May 2023
CEE edges closer towards monetary easing Central banks across Central and Eastern Europe (CEE) provided firmer signs this week that, with inflation now declining , monetary loosening may soon be on the cards. But there are still clearly big concerns that …
28th April 2023
CBR keeps rates on hold, hike still on the table Russia’s central bank maintained its hawkish tone today as it left interest rates unchanged at 7.50% and continued to emphasise pro-inflation risks in the economy. So far these risks do not seem to be …
Calm before the storm? Turkey’s central bank (CBRT) left its key policy rate on hold at 8.50% again today, but all eyes are now firmly on next month’s election for a possible change in the stance of monetary policy. Polls are close, but an opposition …
27th April 2023
Fall in sentiment points to tepid growth The EC’s Economic Sentiment Indicators (ESIs) for Central and Eastern Europe generally fell slightly in April, with our regional measure declining for the first time in six months. On past form, the ESIs suggest …
Inflation has finally turned a corner. Headline inflation rates fell in March in all 14 economies that we cover, the first synchronised drop in more than a decade. This partly reflects base effects resulting from the sharp rise in prices after the war in …
26th April 2023
The Hungarian central bank (MNB) slashed the upper end of its interest rate corridor today by 450bp, to 20.50% and, while this move alone won’t loosen monetary conditions, it is likely to be followed by cuts to the effective policy rate (the overnight …
25th April 2023
MNB kickstarts loosening cycle The Hungarian central bank (MNB) slashed the upper end of its interest rate corridor today by 450bp, to 20.50%, and while this move alone won’t affect monetary conditions, it is likely to be followed by cuts to the effective …
Weak first quarter, economy to flatline March’s activity data out of Poland were weaker than expected and suggest the economy may now be in a technical recession. Activity may start to bottom out soon, but we don’t think the economy is set for a marked …
24th April 2023
MNB takes its first steps towards interest rate cuts The deputy governor of the Hungarian central bank (MNB) made a splash this week by signalling that policymakers may cut the upper end of the bank’s interest rate corridor at their meeting next Tuesday. …
21st April 2023
Large current account deficits across CEE have started to narrow in recent months and we think that this will continue as slowing economies and lower energy prices shrink import bills. This will reduce vulnerabilities, but external risks and currency …
20th April 2023
Romania's economy has outperformed its peers in Central and Eastern Europe (CEE) over the past year, but domestic demand looks unsustainably strong and a period of weaker growth will be needed to reduce the large current account deficit. We forecast the …
19th April 2023
Headline inflation falling, but little else to cheer for The raft of March inflation data released across Emerging Europe this week showed that the regional disinflation process is now well underway, but that core price pressures remain incredibly strong. …
14th April 2023
Although the Turkish lira is at its weakest ever level against the US dollar, it would have fallen far further by now were it not for intervention by policymakers. We anticipate that the currency will depreciate sharply before long against a backdrop of …
13th April 2023
Sharp fall in inflation as base effects pass through Russian inflation fell sharply in March, to 3.5% y/y, as the surge in prices after the war started to fall out of the annual comparison. The 0.4% m/m increase suggests that price pressures generally …
12th April 2023
We’re not convinced by the arguments currently doing the rounds that military spending in Russia artificially boosted GDP in a significant way last year. While military spending has increased further this year and manufacturing in military-oriented …
Earthquakes take their toll on activity Turkish industrial production and retail sales figures for February showed that the impact of the earthquakes on the economy was larger than we and most others had anticipated. But we think this will be short-lived …
CEE remains in recession in Q1 The batch of hard activity data and surveys released across Central Europe this week were relatively weak and suggest that GDP contracted in most economies again in Q1. We think the regional downturn will stabilise in Q2, …
6th April 2023
Rates on hold, but cutting by year end Poland’s central bank (NBP) left its main policy rate on hold as expected again today, at 6.75%, and policymakers look set to keep interest rates at this level at the upcoming meetings. But with inflation likely to …
5th April 2023
Rates on hold, policy to stay tight throughout 2023 Romania’s central bank (NBR) left its policy rate on hold as expected today, at 7.00%, and we think that it will only start to cut interest rates in early 2024, which is later than its regional peers. …
4th April 2023
Israel’s central bank (BoI) raised its policy rate by a smaller 25bp, to 4.50%, as expected today and its communications sounded slightly less hawkish than at its previous meeting. Inflation pressures are likely to remain strong this year, but the door …
3rd April 2023
Overall picture remains downbeat, but some green shoots Manufacturing PMIs for March were weak in Czechia and Poland and suggest that industry remained in recessionary territory in Q1. But there were some bright spots, including the improvement in …
Israel’s legal reforms spark constitutional crisis Israel’s political crisis that flared up earlier this week has since calmed down after PM Netanyahu paused the government’s controversial judicial reforms. While tensions may flare up again and Israel’s …
31st March 2023
Overview – There are encouraging signs that the energy crisis is receding, the worst of the downturn is passing and that inflation has peaked across the region, but this year will still be challenging. We expect below-consensus GDP growth in most …
30th March 2023
Sentiment improving, but still weak The EC’s Economic Sentiment Indicators (ESIs) for Central and Eastern Europe increased in March and suggest that the region’s growth prospects have brightened. But sentiment is still at depressed levels, supporting our …
Economy continues to recover in Q1 The improvement in the Russian industrial production and retail sales data for February provide further evidence that economic activity recovered at the start of this year. We think that GDP is likely to have expanded in …
29th March 2023
Hawkish CNB will turn to cuts in Q3 The Czech National Bank (CNB) left its policy rate on hold today, at 7.00%, for a sixth meeting in a row, and we now think that rate cuts are unlikely until the second half of this year. The decision to leave rates …
Recent turmoil in the banking sector may have been a US and European story, but there are potentially important angles for Emerging Market investors. Our latest EM Drop-In explored the economic spill-over risks from the recent panic and the …
28th March 2023
MNB to keep rates higher for longer as inflation risks persist Hungary’s central bank (MNB) left its benchmark base rate on hold today (at 13.00%) and it is looking increasingly likely that this rate will not be cut until Q4 at the earliest. The phasing …
Russia strengthens China relations after Xi’s visit Russia-China relations were on full show this week as China’s President Xi visited Moscow and the two countries announced a raft of measures to increase ties over the coming years. China has helped …
24th March 2023
The turmoil in the global banking sector has not spread to Emerging Europe, but the focus is back on the health of the region’s banks given the not-so-distant memory of the 2008/09 banking crises that swept across the region. The good news is that banks …
23rd March 2023
CBRT keeps rates on hold after one-off cut in February Turkey’s central bank (CBRT) left its key policy rate on hold at 8.50% today as policymakers kept monetary conditions loose to support activity after the earthquakes in February. Interest rates are …
Turkey’s banking sector has been one of the weak links in the EM world in recent years due to its very high external debt burden. The good news is that banks have paid down these external debts and built up their FX liquidity buffers since 2018. This has …
22nd March 2023
Struggling for momentum February’s activity data out of Poland paint a weak picture and support our view that GDP will, at best, flatline over 2023 as a whole. Even so, the central bank has little scope to help and we expect that high (albeit falling) …
21st March 2023
While the Credit Suisse rescue might draw a line under that particular institution’s problems, it is clear that confidence in the financial sector overall is still extremely fragile. So regardless of whether more financial institutions run into trouble, …
20th March 2023
Worries about the health of the global banking system dominated headlines this week after the collapse of Silicon Valley Bank (SVB) and concerns about the viability of Credit Suisse. Our coverage of ongoing developments can be found here . In terms of the …
17th March 2023
CBR keeps Q2 rate hike on the table The statement accompanying the Russian central bank’s (CBR’s) decision to keep its policy rate unchanged at 7.50% stuck to the hawkish script from February. While it didn’t confirm that an interest rate hike is on the …
A key channel through which emerging markets could be affected by the strains in the global banking sector is if lending by foreign banks falls sharply. On this front, EMs’ vulnerabilities have eased since the Global Financial Crisis. But there are still …
16th March 2023
At the time of writing, financial markets appear to be stabilising after the turmoil caused by the collapse of SVB. And it doesn’t look like EMs have suffered large capital outflows or strains in their banking sectors. If this relatively benign scenario …
14th March 2023
Economy continues to boom in early 2023 The large increases in industrial production and retail sales in Turkey in January suggest that the economy got off to a strong start in early 2023. Activity will have been disrupted from the earthquakes last month, …
13th March 2023
Broad-based falls in inflation last month Russian inflation came in slightly softer than expected in February, at 11.0% y/y, and it will fall to the central bank’s 4% target in March as base effects pass through. We don’t think there’s been enough …
10th March 2023
The view that interest rates in developed markets may rise further and stay higher for longer than previously anticipated gained further traction this week following US Fed Chair Jerome Powell’s hawkish comments on Tuesday. Our US Economics team revised …
The National Bank of Poland (NBP) left its main policy rate on hold as expected today, at 6.75%, and we don’t think policymakers will rule out further rate hikes just yet (today’s statement gave little away in terms of guidance). But with inflation likely …
8th March 2023
Rates on hold, door for rate cuts this year remains open Poland’s central bank (NBP) left its main policy rate on hold as expected again today, at 6.75%, and we don’t think the NBP will rule out further interest rate hikes just yet. But with inflation …
The very high household saving rate in Czechia and the sharp fall in inflation we expect there this year means there is scope for consumer spending to recover over the coming quarters. But we think consumers will still exercise caution and that a …
Koruna strength will add to disinflation in Czechia The recent strength of the Czech koruna, which hit a 14-year high of 23.3/€ this week, adds to a number of disinflationary forces that are currently taking hold in the country. And we think that …
3rd March 2023
Inflation declines, but disinflation process slows Inflation in Turkey fell to 55.2% y/y in February, but underlying price pressures remain strong and the disinflation process appears to be happening more slowly than had been expected. Inflation will stay …
The Israeli shekel has been amongst the worst performing currencies over the past month amid a rise in risk premia in Israel. We think it may remain under pressure against the US dollar over the coming months; but we doubt it will keep underperforming its …
1st March 2023
Industrial downturns in CEE bottoming out The manufacturing PM Is for February suggest that industrial sectors in Central and Eastern Europe are continuing to struggle, but there are tentative signs that the region may now be past the worst of its …
