CEE: Sustainable growth needs to be supported by innovation
On the radar
- In Romania net wage growth reached 4.4%, while inflation landed at 9.9% y/y in September.
- In Serbia inflation declined to 2.9% y/y in September as caps on wholesale and retail margins kicked in.
- Today, current account data are due in Czechia (9AM CET), in Poland (2 PM CET) and in Romania.
- In Poland, trade data, exports and imports will also be published for August.
Economic developments
In today’s CEE Daily we are paying tribute to 2025 Nobel Prize winners in Economic Sciences Joel Mokyr, Philippe Aghion and Peter Howitt who explain how innovation provides the impetus for further progress. Mokyr showed that sustained growth requires not only practical knowledge, but also scientific explanations and a society open to new ideas. Aghion and Howitt build on the model of creative destruction: new technologies bring progress, but at the same time they displace old solutions. The work of laureates emphasizes that growth cannot be taken for granted and that the mechanisms enabling innovation must be protected. CEE countries are not innovation driven. At least not yet. The economic progress and convergence toward Western Europe have been enormous over last two decades, however. Poland is an unquestionable leader – real GDP doubled over last 20 years. Slovakia’s and Romania’s GDP grew by almost 80% since 2005. In general, all CEE countries outpaced the EU and the Eurozone and closed the gap substantially.
Market movements
CEE currencies strengthened slightly against the euro, while long-erm yields declined marginally on Monday, despite escalating trade tensions between the US and China. Poland’s central banker Kotecki stated that the October interest rate cut should be the last one in 2025, with any further reductions only being considered in 2026. Romania sold successfully 2028 and 2033 government yields that were priced to yields 7.31% and 7.27% accordingly. In Czechia, the government talks entered a difficult moment amid allegations that potential foreign minister Turek made racists and homophobic comments on social media. ANO needs support of both SPD and Motorists to be able to form majority in the Parliament.
Author
Erste Bank Research Team
Erste Bank
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