CEE shows resilience despite global risks

On the radar

• Fitch Ratings affirmed Slovenia’s rating at A+ and stable outlook.
• Slovakia releases industrial sales and average real wage in industry at 9 AM CET.
• Czechia and Poland will publish current account balance for July.
• Poland at the top of that will show trade data, export and import growth.

Economic developments

We released our new CEE Macro Outlook | Resilience to global headwinds but risks persist at the end of last week. In the latest forecast round, we revised growth upwards in Serbia and Slovenia, while changes in most other countries were relatively marginal compared with our June forecasts. Romania remains the notable exception, where we now expect a deeper recession, with GDP contracting by 0.7% in 2026. Overall, the CEE region continues to show resilience despite a challenging external environment. A prolonged period of geopolitical tensions and persistently high energy prices remains a key downside risk. On the positive side, economic activity picked up visibly in the Eurozone in 3Q, improving the region's growth prospects beyond 2026. On inflation, we have seen some stabilization, but the recent increase in oil prices poses a significant upside risk to the inflation outlook and, consequently, to the path of monetary policy. In Czechia, we expect some tightening of monetary conditions by the end of the year, while in Hungary we still see room for further rate cuts. In Poland and Serbia, stable policy rates remain our baseline scenario as long as inflation stays contained. In Romania, discussion about monetary easing is likely to intensify as inflation falls closer to the level of the key policy rate. All in all, the combination of energy-price risks, diverging inflation dynamics and different monetary policy paths should remain a key driver of CEE rates and FX markets in the coming months.

Market movements

Increasing geopolitical tensions leave the mark on FX and bond market in the region with Brent price of oil above USD 100 per barrel and natural gas prices rising further (TTF natural gas forwards above 80 EUR/MWh). This week, global developments will determine the local markets as the FOMC meets this week. In light of persistent core inflation, rising inflation expectations, and new upside risks stemming from higher energy prices, the Federal Reserve’s wait-and-see approach is becoming increasingly difficult to justify. Locally, government bond yields continued to climb last week (10Y sovereign yields rose by around 20bp w/w in Hungary and Poland) while EURCZK is at 24.25, EURHUF at 364 and EURPLN at 4.32. In long-term horizon Hungary eyes 10Y yields to fall toward 4% according to Tardos from Debt Agency if plan to join Eurozone proves to be successful. In Poland central banker Wnorowski and other central bankers (Kotecki) echoed Governor Glapinski standpoint about stability of rates. Kotecki, however, was quite specific in pointing to 4% inflation as a point in which monetary tightening should be considered.

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