Key events in EMEA next week

In Hungary, we see both the retail sector and industry closing 2017 on a positive note, putting away any debate regarding the expected pick-up of economic activity in 4Q17. The budget is expected to start 2018 in an unusual shape: the high cash-flow based deficit in January might be the result of the continued EU project pre-financing strategy by the government.

We expect the National Bank of Poland’s Governor Glapiński to reiterate a dovish message during the MPC press conference. The committee is likely to cool down hike expectations for 2019, which were triggered after the publication of the governor’s interview from Davos. In our opinion the most likely outcome is that the MPC continues forward guidance, stating no interest rate hike in 2018. Recent interviews in the Polish press suggest that A. Glapinski is unlikely to extend such obligations to 1H19.

In Turkey, December’s data showed a fall in the headline inflation, and in the coming months the easing base effects will continue to contribute to the recovery in the inflation outlook. Accordingly, we expect the annual figure to decline further in January to 10.5% year-on-year (1.2% month-on-month) from 11.9% a month ago.

We expect the National Bank of Romania (NBR) to deliver another 25bp hike to 2.25% on 7 February, as the minutes for the previous meeting mentioned that ‘monetary conditions had become slightly less accommodative’, suggesting more to be done to remove policy accommodation with January CPI data expected to come in above the upper bound of the NBR target interval. As a risk scenario, we could see the NBR leaving rates unchanged and deciding on firmer liquidity management as suggested by the NBR governor.

We expect the National Bank of Serbia to remain on hold as 1H18’s expected temporary fall in inflation is due to base effects while inflation expectations remain well anchored. There is a minor risk for a rate cut to encourage the Dinarisation process.

In the Czech Republic, despite the fact that the December figures will be affected by the calendar bias caused by two less working days, year-on-year dynamics should remain favourable. Industrial production might be again influenced by the company holidays, which caused weak prints last December. But some preliminary figures indicate that production was relatively strong in December, and that the low-base from December 2016 might deliver solid dynamics of industry despite the unfavourable calendar bias. January’s unemployment rate might slightly increase due to typical seasonality, but the labour market remains very tight.

In the CIS space, the Russian Central Bank’s policy decision is widely expected, and we now see the regulator choosing to cut the key rate either by 25bp or even 50bp after some growth weakness in 4Q17 and inflation being likely to make a new all-time low of 2.2% in January 2018 in the release before the CBR meeting. Ukraine will also see its inflation data, which may help to shape market expectations about future National Bank of Ukraine policy decisions.