CEE: Firms’ investments focus mostly on capacity replacement, rather than expansion

On the radar

• Industrial output growth in September was very strong in Poland reaching 7.4% y/y.
• In Poland, producer prices declined by -1.2% y/y in September, employment dropped by -0.8% y/y while nominal wage growth was at 7.5% y/y.
• In Slovakia, current account deficit reached EUR -352 million.
• Today, Hungarian central bank holds a rate setting decision. We expect no change.
• At 10.30 AM Slovenia releases producer prices.
• At 11 AM CET, Croatia publishes unemployment rate and real wage growth.

Economic developments

Latest EIB Investment Survey for 2025 finds that investment has been, so far, showing remarkable resilience (given global turbulence and introduction of tariffs) but the appetite has somewhat weakened. EU firms continue to focus their investment on replacement rather than capacity expansion, with the share of firms investing to expand operations 7 percentage points below the share of US firms doing so. In Germany, 63% of total investment was allocated to replacement purpose. Within the region, Czechia, Romania, Hungary and Slovakia are most likely to focus on capacity expansion. The share of investment related to that purpose in those four countries is even slightly higher than in the US. On the other hand, in Poland share of investment for capacity expansion is the lowest. EU firms also allocate lower share of investment to new products and services than US firms. In CEE the average share of investment going to new products and services is very similar to the EU average (12% vs 13% in the EU).

Market movements

Romania’s Constitutional Court struck down a government bill to raise the retirement age for prosecutors and judges and reform their pensions. The reason why the bill was declared unconstitutional seems to be related to procedural issues regarding the consultation period with other institutions, rather than the content of the bill itself. According to press releases, majority of judges rejected the law because the government didn’t seek the opinion of the Superior Council of Magistrates beforehand. The PM Bolojan is likely to remain in the position despite earlier threats of leaving the post. Today, Hungarian central bank holds a rate setting meeting and no change in the key policy rate is broadly expected. EURHUF holds at 398, while EURPLN moved slightly down to 4.23 on Tuesday morning. The Czech koruna was mostly stable since the beginning of the week. The long-term yields have declined slightly across the region, while 10Y yields in Romania hold close to 7% despite the turbulence around the government bill.

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