CEE region with relatively diversified energy supply

On the radar

• We reduced this year's GDP forecast to 0.5% in Hungary.

• In Romania, central bank kept the policy rate unchanged at 6.5%.

• Moody’s upgrade Croatia’s rating by two notches to A3 with stable outlook.

• S&P and Fitch Ratings confirmed Poland’s rating and outlook.

• Trade balance in Romania was reported at EUR 2571.5 deficit for September.

• October’s inflation in Czechia was published at 2.8% y/y.

• At 10.30 AM CET Slovenia will release industrial output data.

Economic developments

Drawing inspiration from the Energy Supply Security Index developed by the European Stability Mechanism, we have expanded the scope to include non-Eurozone countries. Given that the methodology emphasizes the diversification of energy supply - both in terms of energy sources and the geographical origins of their imports - a more accurate description for this index would be the Diversification Index. Within our region, Romania, Slovenia, Czechia and Poland exhibit well-diversified energy supplies. Hungary, Croatia, and Slovakia are positioned around the middle of the EU spectrum, demonstrating respectable scores that are not far behind their more diversified CEE counterparts. Romania has relatively well-diversified imports, while Slovenia and Czechia also benefit from diverse primary energy sources. The index does not account for the sustainability of energy resources, which provides Poland with a certain advantage. Conversely, Hungary and Slovakia face penalties due to their imports from Russia, as all geographical sources of imports have been penalized if the score poorly in the World Bank governance indicators. More about the energy sector is in our CEE Special Report: Energy prices to remain high as CEE embraces renewables.

Market movements

While upgrade from Moody's has been largely anticipated, the decision to bump the rating up by two notches delivers strong tone from rating agency known for more cautious view on Croatia's rating prospects. Croatia is now rated at 'A3' by Moody's with outlook being tuned down to 'stable', thus being aligned with both S&P and Fitch. Poland’s rating and outlook was confirmed by S&P and Fitch Ratings. The Romania central bank decided to keep the monetary policy rate at 6.50% at the last monetary policy meeting of the year. The updated inflation forecast shows inflation on a higher path than previously anticipated and is now expected to enter the variation band of the target only in 2026. Significant uncertainties and risks stem from the future fiscal and income policy stance. In Poland, Prime Minister Tusk announced he wanted to keep the energy prices frozen in 2025. Volatility was the main characteristic of the past week. CEE currencies began the week quite weak against the euro. After the outcome of the US election and Donald Trump being elected as the next US President, CEE currencies depreciated sharply but shortly. After the FOMC decision to lower key interest rates by 25bp, the currencies strengthened again and returned below the levels from the beginning of the week, and they ended the week slightly stronger against the euro. Government bond yields declined during the week, particularly in the latter half.

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