Growth slows, markets rally

A raft of recently released Q3 GDP data for Emerging Europe paints a pretty gloomy picture. The Czech and Hungarian economies are still stuck in recession, while even the region’s better performers – Russia and Slovakia – slowed sharply. Altogether, we think the region’s economy expanded by around 1.8% y/y in Q3, down from 2.5% y/y in Q2 and around 5% over the course of last year. What’s more, the manufacturing PMIs suggest that much of the region got off to a poor start in the final quarter of this year. Nonetheless, financial markets have been relatively resilient despite the gloomy economic data. Bond yields have fallen further in most countries this month and currencies have strengthened.