CEE: Easing real wage growth

On the radar

• 1Q25 GDP in Romania was revised marginally up to 0.3% y/y. Retail sales grew 3.1% y/y in April.
• In Hungary industrial output declined by -2.3% y/y and retail sales went up by 5.0% y/y in April.
• At 9 AM CET Slovakia releases 1Q25 GDP structure and retail sales growth in April. Czechia will publish industrial output growth in April.
• At 11 AM CET Croatia will release tourism arrivals in April and at noon CET Serbia will publish producer prices.

Economic developments

Since the beginning of the year, we have seen real wage growth easing. In all CEE countries except Czechia, real wage growth dynamics have slowed compared to 2024. In Czechia, real wage growth in Q1 2025 reached 3.9% year-over-year, sustaining the momentum from the end of 2024. However, throughout the year, nominal wage growth is expected to decelerate further, as inflation visibly eased in 2024 and is projected to decline further over the course of the year. This development limits the room for employees to demand wage increases. We believe this is the main reason behind the easing of real wage growth in other CEE countries. On the other hand, the labor market remains tight. Therefore, we expect real wage growth to remain positive this year—albeit lower compared to 2024, and to continue supporting private consumption.

Market movements

As expected, Governor Glapiński adopted a hawkish tone during his press conference, stating that it is difficult to provide any guidance regarding the direction of monetary policy. Another central banker, Kotecki, confirmed that the Monetary Policy Council is becoming more cautious about the future path of interest rates amid rising political instability and a bloated budget deficit. He still sees room for a 50 basis point cut this year. Wnorowski’s appetite for monetary easing has also diminished, though he still sees space for two rate cuts of 25 basis points each. It appears that the consensus for another rate cut is shifting away from July toward September, if at all this year. The EUR/PLN moved further up toward 4.28, losing more than half a percent against the euro since the beginning of the week. In contrast, the Czech koruna and the Hungarian forint have strengthened against the euro this week, clearly indicating that the Polish zloty is being driven by local factors.

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