CEE growth navigator after 1Q25 flash GDP

Compared to the last report, we made visible adjustments to our growth forecast in reaction to flash estimates of 1Q25 GDP data. In April, we reacted to the announcement of Trump’s tariffs. At that point, the revision of forecasts for 2025 was rather marginal as we considered that potential impact on CEE growth from German fiscal impulse (positive) will be outweighed by tariffs shock (negative). After seeing 1Q25 flash estimates, however, we further slashed the growth forecasts in Hungary (to 0.8% in 2025), Serbia (to 3.1% this year) and Slovenia (to 1.5% in 2025), while in Romania and Slovakia, the risks remain skewed to the downside. Only Czechia and Poland expanded in line with expectations and with solid growth dynamics (2.0% y/y and 3.2% y/y, respectively), and we maintain our 2025 GDP forecasts in these two countries.

Apart from Romania and Slovenia, headline inflation eased in April in all other CEE countries. The recent drop of energy prices is a positive factor for price development. On the other hand, the Food Price Index increased lately and its level remains elevated. Despite an easing trend, the inflation rate remains above the central banks’ target in all countries but Czechia. The average 2025 inflation is likely to be higher compared to 2024 in most of the CEE countries. Only in Romania and Serbia 2025 is average inflation expected to be lower compared to 2024.

The Czech National Bank lowered its interest rates to 3.25% since the beginning of the year. Looking ahead, we anticipate the next CNB rate cut in November. Similarly, the Polish central bank reinstated monetary easing ahead of presidential elections and reduced its target rate by 50 basis points, from 5.75% to 5.25%. In our baseline, we will see an additional 50-75bp worth of cuts until the end of the year. In other countries, namely Hungary, Romania and Serbia, we anticipate monetary easing in the second half of the year only. In Romania, monetary easing will depend on the fiscal consolidation plan and its impact on growth and inflation.

Download The Full CEE Outlook