Diverse financial health in CEE

On the radar

• Industrial output contracted by 2.7% y/y in Czechia (NSA number), while in Hungary it dropped by -5.6% y/y in November, surprising market visibly to the downside.

• Retail sales in Slovakia landed at -1.5% y/y in November, while producer prices in Serbia arrived at 1.1% y/y in December.

• Unemployment rate in Romania remained unchanged at 5.4%.

• Today, Polish central bank will announce the interest rate decision.

• In Slovakia and Croatia, trade data will be published.

Economic developments

Our colleagues at Slovenska Sporitelna have recently unveiled their “Financial Health Index”, which primarily focuses on the financial well-being of households in Slovakia. The final index was calculated for the whole EU, thereby providing insights into the financial health of households in other CEE countries. The index takes into account a multitude of factors, including financial literacy, economic equality, investment patterns, and housing affordability. Slovenia and Czechia rank as financially robust nations, securing the 3rd and 6th positions respectively. Hungary, the next CEE country in our ranking, is positioned only at the 20th place. Unfortunately, three out of the last five countries in the ranking are from the CEE region, specifically Slovakia (23rd place), Croatia (25th), and Romania (26th). Slovenia and Czechia have benefited from high scores in financial literacy and low rates of persons at risk of poverty or social exclusion. Conversely, Romania finds itself at the bottom of these categories, while Croatia sits at the end mainly due to poor financial discipline and literacy. Slovakia’s relatively underwhelming performance can be attributed to factors such as high indebtedness, unaffordable housing, and overly risk-averse investment strategies.

Market developments

Today, the Polish central bank will announce the rate decision and there is broad consensus that the key policy rate will remain unchanged at 5.75%. After the release of December’s flash estimate of inflation, the market began to price in further rate cuts in the amount of 100 basis points within one year as FRA 9x12 went to 4.74%. As for the FX market, the CEE currencies strengthened against the euro at the beginning of the week, while the bond market showed mix performance. Long-term interest rates are slightly lower in Poland and Slovakia, while they went up marginally in Czechia, Hungary or Romania.

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