CEE: Hungary’s way to EU funds is open

On the radar

• Fitch confirmed Serbia’s rating at BB+ with positive outlook.
• Today at 8 AM CET, Romania will release June’s inflation alongside wage growth.
• Serbia will also publish June’s inflation data at noon CET.

Economic developments

Today, we zoom in on Hungary, as the European Union’s Economic and Financial Affairs Council (Ecofin) approved Hungary’s revised recovery and resilience plan on Friday, paving the way for the release of around €10 billion in grants and concessional loans. The government must complete the reforms and milestones associated with the revised plan by 31 August, while the Commission can disburse payments until the end of 2026. The largest allocation will go towards sustainable green transport, with significant amounts earmarked for business financing, energy development and digital innovation. In other CEE countries, RRF payments can also be disbursed until the end of 2026. We therefore expect relatively strong investment activity this year and next, while RRF funds continue to be utilized. Furthermore, the European Commission has officially approved Hungary’s accession to the European Public Prosecutor’s Office (EPPO), making the country the organization’s 25th member state. Following the accession, the EPPO’s competence will extend retroactively to crimes involving EU funds committed in Hungary after 1 June 2021.

Market movements

CEE currencies weakened more visibly against the euro last week amid an increase in global uncertainty. EURPLN moved higher towards 4.30 at the end of the week, additionally supported by dovish comments from Governor Glapiński suggesting the possibility of a 25-basis-point rate cut in September. Long-term yields increased in response to global developments and renewed concerns following US strikes on Iran. Fitch affirmed Serbia’s sovereign rating at BB+, with a positive outlook, citing a stable exchange rate, prudent fiscal policy and high foreign-exchange reserves, while highlighting an expected acceleration in growth alongside the stabilization of public debt. According to Fitch, the positive outlook reflects the prospect of stronger investment-led economic growth following the recent slowdown, the stabilization of government debt at a lower level and a proven record of resilience to external shocks. However, heightened political uncertainty, including uncertainty related to potential early elections, may result in renewed social protests, posing downside risks to economic growth and foreign-exchange reserves.

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