CEE countries significantly richer since entering the EU

On the radar

• Unemployment rate in Croatia declined to 6.2% y/y in March, while real wage grew by 8.0% y/y in February.

• Unemployment rate in Slovakia remained stable at 5.1% y/y in March.

• Today, at 10 AM CET, Poland will publish industrial output growth in March, producer prices, employment and wage growth in March as well.

• At 10.30 AM CET Slovenia will release wage growth for February.

Economic developments

As the 20th anniversary of the EU enlargement for many countries from our region (Czechia, Hungary, Poland, Slovenia, and Slovakia) approaches, in the coming days we will be highlighting key issues related to the benefits of membership, as well as the challenges ahead. We begin with an overview of the development of GDP per capita since 2004. We clearly see that Poland and Romania outperformed and are now twice as "rich" as they were in 2004. In other words, their GDP per capita doubled over the last two decades. Slovakia also reached outstanding performance, with GDP per capita 75% higher compared to 2004. Slovenia and Czechia gained 40%, yet their starting point was the highest among all CEE8. Hungary achieved similar performance, which for some may be considered as disappointing given the low level of income after economic transition. Finally, although Serbia is not an EU member, economic development was also very dynamic. However, Serbia remains the poorest country within CEE8.

Market movements

Throughout last week, the Hungarian forint and the Polish zloty weakened against the euro, while the Czech koruna strengthened. This week, the Hungarian central bank meeting is a key event in the local markets. Our baseline is a 50bp cut in line with Deputy Governor Virag's implication of a slower pace of rate cuts. However, a higher rate cut at the upcoming meeting cannot be ruled out, assuming that the central bank would take a break and wait for major central bank decisions before moving further. The long-term interest rates have been increasing further following developments in the core markets. This week, Czechia, Poland, and Romania will be active on the bond market as these countries have local currency auctions scheduled.

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