EME Macro/Strategy: good news and challenges – the state of play in March

From a cyclical perspective, the Central Banks have won the battle on inflation, at the cost of weaker spending and a halt in the investment cycle. The difficulty now is to recalibrate policy design holistically, to allow the necessary investment to restart, managing the inflationary effects as much as realistically viable. The global backdrop remains consistent with our Year Ahead views, but we have made some important changes to other countries’ stories. In Poland, the disbursement of EU money will be faster than we had expected, which will be favourable for growth, but also adds delays to the NBP’s easing cycle. In Hungary, inflation is decelerating more than we expected to see, but the political backdrop continues to worsen, notwithstanding the positive developments last December. Greece has underperformed our expectations, due to a bigger drag from net exports and weak investment.