CEE growth remains resilient

On the radar

• Current account deficit reached in June EUR -226 million in Slovakia and EUR-885.7 million in Serbia.
• Today, Poland has series of releases scheduled: industrial output, producer prices, employment and wage growth in July.
• Slovakia is expected to release unemployment rate for July.

Economic developments

Growth Navigator in response to 2Q26 GDP data summarizes recent economic developments in the region and changes in expectations for the reminder of the year. First of all, it is worth to underline that, despite the conflict in Middle East, CEE region’s performance was solid in the first half of the year. Overall, most CEE countries will grow around 2% this year, with Poland and Serbia outperforming (growth expected above 3%). Finally, Romania is likely to suffer from recession and we keep seeing risks to the downside in Slovakia. Further, price pressures remain contained across the region as inflation eased in most of the CEE countries (Czechia and Poland are exceptions) and 2026 average forecast was revised downward in several CEE countries. Romania should see strong disinflation in the second half of the year and at the run of 2026 and 2027 the discussion on rate cuts in Romania should begin. Hungary continues its monetary easing cycle, while in Serbia we see risks for rate cuts in the course of 1H27 once inflation forecasts are adjusted further downward.

Market movements

In Poland, the government has presented proposals to reduce the tax burden on the middle class, i.e., to lower personal income tax (PIT) for individuals earning more than PLN120k annually. In our view, the cost of these proposals will amount to approximately PLN10bn and is to be financed by higher tax levies elsewhere, most notably a higher corporate income tax (CIT) rate for the largest companies. The changes are intended to be neutral for the budget deficit. From the debt market's perspective, the government's proposal is rather positive news, as it does not confirm concerns that have been building recently about possible pre-election promises that could increase the fiscal deficit in 2027. In Hungary, Prime Minister Magyar marked the Tisza government's first 100 days by claiming roughly HUF 1,000 bn improvement in the budget balance and the unblocking of previously frozen EU funds via rule-of-law and anti-corruption steps. Further, the government plans to submit legislation this autumn to join the European Public Prosecutor's Office. Finally, in Croatia, central government revenues are tracking slightly above plan with the deficit set to stay below 3% of GDP, but local budgets remain under pressure.

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