CEE: Manufacturing outlook turns more positive

On the radar

• GDP growth in Serbia surprised to the upside arriving at 4% in 3Q26.
• Manufacturing PMIs landed at 55 in Czechia, 50 in Poland and 48.7 in Romania in October. In Hungary PMI remained at 53.1
• Today, Romania releases producer prices.

Economic developments

Manufacturing PMI readings in October point to heterogenous industrial recovery across the region. Czechia stands out as the strongest performer, with the manufacturing PMI rising to 55.0 in October from 53.5 in September. October’s reading is also the highest since the Russia’s invasion on Ukraine. The improvement was driven by stronger production and new orders, with export demand expanding at the fastest pace since August 2021. Employment also increased, suggesting that the recovery is becoming more broad-based. Poland also delivered a positive surprise, with its PMI rising to 50.0 from 49.0, significantly exceeding market expectations of 49.4 and reaching the neutral threshold for the first time since April 2025. The improvement was supported by stronger export demand, stabilizing production and renewed hiring. Although total new orders continued to decline, the pace of contraction moderated, suggesting that Polish manufacturing may be approaching a turning point after a prolonged period of weakness. Romania, in contrast, returned to contraction, with its manufacturing PMI falling to 48.7 from 50.9 in September, ending three consecutive months of expansion. The deterioration reflected weaker output and new orders, including export orders, highlighting persistent weakness in both domestic and external demand. Elevated energy and transportation costs, subdued purchasing power and uncertainty continue to weigh on industrial activity. All in all, however, manufacturing PMIs allow for dose of optimism regarding the 2027 outlook as economic prospects not only in the region but also in the external environment (Germany’s manufacturing PMI at 54.2) has been improving lately.

Market movements

Romania raised EUR 4.5bn in international bond offering across three tranches, comprising EUR 1.25bn in four-year bonds, EUR 2bn in eight-year bonds and EUR 1.25bn in 12-year green bonds, with investor demand exceeding the offered amounts across all three tranches. The Finance Ministry also sold RON 2.82bn of local bonds on Monday. In Czechia, the January–October state budget deficit widened to CZK 230.9bn from CZK 183.1bn a year earlier. In Hungary, Fiscal Council Chair Horvath called the planned deficit reduction from 7.5% of GDP in 2026 to 4.9% in 2027 "particularly ambitious," noting that the 2.4% growth assumption is below consensus and that withdrawing special levies will be difficult. In Slovakia, the state budget's January–October cash deficit narrowed, as revenue rose by 13.7%, outpacing expenditure growth of 6.3%. In Poland, Finance Minister Andrzej Domański will discuss four presidential nominations to the NBP Management Board that are awaiting PM Tusk's countersignature ahead of Deputy Governor Lipiński's term expiring on November 4, which could leave the board below its statutory minimum. The Polish zloty remains weak (EURPLN at 4.41) as opposed to peers in the region (Czech koruna and Hungarian forint strengthened marginally on Monday). The interest rate decision of Poland’s central bank is scheduled on Wednesday.

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