1Q GDP flash estimates – The first reality check

This week will provide more insight into the economic performance of several CEE economies in 1Q and the economic sentiment following the announcement of US reciprocal tariffs. Flash GDP growth estimates for 1Q25 will be published for Czechia, Hungary and Serbia. In Hungary and Czechia, the q/q dynamics are expected to slow down in 1Q25 compared to 4Q24, to 0.2% and 0.4%, from 0.6% and 0.7%, respectively. A deceleration of growth is also expected in Serbia, where y/y growth is projected at 3%, down from 3.3% in 4Q24. This week, April PMIs and the Economic Sentiment Index will provide initial hints on how businesses and consumers perceive their current economic situation and outlook at the beginning of 2Q, shortly after the reciprocal tariffs were announced. Several CEE countries will publish their flash estimates of April inflation, which should ease, due to lower fuel prices. The first round of the repeated Romanian presidential elections will take place on Sunday. While surveys favor Simion as the likely winner of the first round, a much closer race is expected for his contender in the second round between the pro-government Antonescu and the mayor of Bucharest, Dan.

FX market developments

On Tuesday, the Hungarian central bank will hold its MPC meeting, with the widely expected outcome that rates will remain on hold. We anticipate some monetary easing (altogether -50bp) only in the second half of this year, when rates on global markets decline further. On the other hand, the substantial reduction in inflation expected in Poland, along with recent softer monthly economic data, suggests that Poland’s central bank could restart its monetary easing already in May with a 50bp rate cut. Last week’s performance of CEE currencies was supported by a weaker dollar. The Czech koruna appreciated below the 25 level against the euro and the Hungarian forint returned below 406.50 vs. the euro.

Bond market developments

The situation on CEE LCY bond markets was rather calm in the shortened week preceded by the Easter holidays. Among CEE countries, only Hungarian government bonds reacted positively to a slight decline in US Treasury yields. Romania’s 10Y yields remain elevated at 7.5% ahead of the first round of presidential elections. It seems that some relaxation may come only with the consolidation plan, which could be unveiled at the end of May or beginning of June, at the latest. The auction calendar for this week will be relatively empty, with Poland and Hungary conducting their usual bond auctions. Hungary will also sell T-bills and Romania will reopen ROMGBs 2027 and 2035.

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