CEE: IMF updates their World Economic Outlook

Erste Bank Research Team Erste Bank

On the radar

Inflation rate in Romania landed at 9.87% y/y in March. In Czechia it was confirmed at 1.9% y/y.
In Serbia March inflation arrived at 2.8% y/y in line with expectations.
Today at 8 AM CET, industrial output growth will be released in Romania in February. Wage growth will also be published and year-to-date current account.
Slovakia and Poland will publish details for March inflation.
Hungarian central bank releases minutes from the meeting.

Economic developments

As the IMF published the World Economic Outlook (WEO), we begin our reporting with an update on global growth and inflation before turning to the region. According to the IMF, the global economy is once again being disrupted, this time by the outbreak of war in the Middle East. Rising commodity prices, firmer inflation expectations, and tighter financial conditions are testing the recent resilience of the global economy. Before the outbreak of the conflict, bottom-up forecasts had indicated a stable growth path. Global growth would have been revised up to 3.4% in 2026 and 3.2% in 2027. At present, and under the assumption that the war turns out to be relatively short-lived, global growth is expected to slow modestly. In an adverse and severe scenario, the economic outlook would obviously worsen further. Headline inflation has been revised up, as expected.

Market movements

Amid the US blockade of the Strait of Hormuz, the US and Iran are looking to arrange another round of peace talks. Rising expectations that the conflict may be nearing an end are supporting market developments, as the risk-off mode is being switched off. Nevertheless, according to ECB President Lagarde, the euro area economy has been pushed away from the ECB’s base-case outlook. As for regional news, Poland’s Finance Ministry reported the budget deficit at the end of March at around PLN 69.5 billion. In Czechia, discussions between the Prime Minister and the central bank are taking place, with PM Babis suggesting that interest rates should be lower so as not to hinder lending activity. On the other hand, Governor Michl is ready to tighten monetary conditions if core inflation rises. CEE currencies have strengthened, while yields remain lower across the region.

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Erste Bank Research Team

Erste Bank

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