Directional Economics EMEA: A dangerous descent

Watchers of the Central and Eastern European (CEE) economies are well aware that the region went into the supply shocks of 2020 and 2022 with very tight labour markets and that local central banks were some of the first to embark on tightening cycles in 2021. After aggressive rate hikes, expectations are high that this region will be the first to see a decisive turn lower in inflation and the first to witness large monetary easing cycles.

The problem for policymakers in the region is that the descent from peak inflation and peak interest rates will be a dangerous one. While it is clear that the decline in real incomes will weigh on consumption and investment into 2023 – and clear that growth in the region will be substantially weaker – what is not clear is how quickly inflation will fall.

In this report, we look at the challenges facing CEE economies and policymakers, with a particular focus on FX and local rates. And from Azerbaijan to Ukraine, we dive deeply into individual countries to understand what we can expect next as their economies respond to both external and internal challenges. 

Please note that this is the non-investment research version of Directional Economics EMEA and does not include the investment strategies contained in the Global Markets Research version.