CEE: Economic sentiment keeps deteriorating

On the radar

• In Croatia, retail sales grew by 4.9% y/y in April while industry expanded by 6.5% y/y
• In Hungary producer prices grew 7.9% y/y
• In Czechia 1Q25 GDP was revised up to 2.2% y/y. The growth was driven by higher consumption and inventories change.
• At 10 AM CET Poland will publish flash estimate of May’s inflation and at 10.30 AM CET Slovenia will release May’s inflation data
• At noon CET, Serbia publishes industrial output and retail sales growth in April as well as trade data.

Economic developments

While the overall Economic Sentiment Indicator (ESI) deteriorated further in April (the CEE8 average dropped marginally to 97.2 in May from 97.35 in April), consumer confidence shows signs of recovery. Looking across countries, Czechia, Croatia, and Slovenia reported improvements in overall economic sentiment, while pessimism persists in others, most notably in Hungary, Serbia, and Slovakia. Hungary’s economy underperformed in the first quarter of the year, while Slovakia faces the highest effective tariff rate due to its automotive sector’s exposure to the U.S. and the 25% tariff rate.Finally, the uptick in consumer confidence is encouraging. If this trend continues, private consumption should continue to support growth in a more meaningful way in the quarters to come.

Market developments

The Czech koruna depreciated slightly against the euro this week, while the Polish zloty strengthened. Long-term yields declined over the week. This weekend, Poland will hold the second round of its presidential elections. According to the latest polls, Trzaskowski (the candidate of the ruling party) holds a marginal lead. However, the results of the first round suggest that support for Nawrocki (the opposition candidate) may be underestimated in the polls. Voter turnout is likely to be crucial for the election outcome, similar to the case in Romania—i.e., higher turnout tends to support the centrist candidate.

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