CEE: Innovation capabilities of the region need to catch up

On the radar

• Lorem Retail sales in Slovakia were released at -0.4% y/y.
• Czech industry expanded by 0.2% y/y, a surprise to the downside.
• Retail sales in Hungary came at 3% y/y while industrial production at -4.9% y/y.
• Today, Croatia and Serbia will release the PPI figures.
• Central bank meetings are scheduled in Czechia and Serbia.

Economic developments

Continuing from yesterday’s discussion on public R&D expenditure, we remain focused on the theme of innovation. The recently published European Innovation Scoreboard (2025) by the European Commission provides information about innovation performance across EU member states, including those in CEE. While the EU average innovation score stood at 112.5, all CEE countries fell below this benchmark. The ranking closely mirrored patterns observed in public R&D spending. Slovenia led the region with a score of 106.5, followed by Czechia (90.9) and Croatia (80.6). These three countries were classified as “Moderate Innovators”, a two tiers below the “Innovation Leaders” (primarily Nordic countries) and one tier below “Strong Innovators” (Western EU nations and Estonia). The remaining CEE countries were placed in the lowest category, “Emerging Innovators”, indicating significant room for improvement. The need to progress is especially evident in Romania, which ranked last among the EU countries. Country-level profiles reveal that Slovenia, Czechia and Slovakia performed relatively well in the area of exports of medium- and high-tech products. However, the region as a whole showed weaknesses in intellectual property generation, as well as in resource and labour productivity.

Market movements

The inauguration speech of Poland’s new president, Nawrocky, had little impact on the Polish zloty. His firm stance against the current government was widely anticipated, and his opposition to euro adoption—an issue not currently on the government’s agenda—is not seen as a market-moving development. CEE currencies remained stable yesterday, supported by continued weakening of the U.S. dollar against the euro. Today’s central bank meetings in Czechia and Serbia are expected to result in unchanged policy rates. However, the CNB meeting will be closely watched, particularly for its updated forecasts, as markets seek confirmation on whether the easing cycle has truly ended; an idea recently suggested by Deputy Governor Zamrazilova. In recent months, market expectations for further monetary easing have been fully priced out. We still pencil in one final 25bp rate cut for February next year, though this remains uncertain.

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