Fragile recoveries in Russia and Turkey

The latest activity data from Russia and Turkey suggest that both economies lost momentum in Q1. Our GDP Trackers indicate that output in Russia stagnated in annual terms (following an expansion of 0.3% y/y in Q4) and that growth in Turkey weakened to around 2% y/y, down from 3.5% y/y in Q4. Admittedly, the monthly data in the first quarter were volatile and were distorted by unfavourable working-day effects. In Russia, in particular, we expect growth to pick up in the coming quarters (and, indeed, by more than the consensus expects). Nonetheless, the latest figures highlight that the recoveries in both countries are likely to remain fragile. In the meantime, the prospect of weak Q1 GDP data adds to reasons to think that the Russian central bank will lower its policy interest rate later this week (we have pencilled in a 50bp cut) and that pressure might start to build on the Turkish MPC to reverse the recent tightening cycle.