Fertility in CEE remains below replacement level

Erste Bank Research Team Erste Bank

On the radar

Today, Slovakia will publish producer prices in September.
Slovenia will release Retail Sales growth in September.
In the evening hours (CET) the US Fed will announce interest rate decision.

Economic developments

Fertility rates across CEE remain well below the replacement level of approximately 2.1 children per woman, highlighting the region’s considerable demographic challenges. In 2024, Poland recorded the lowest fertility rate in the region at just 1.14, followed by Czechia (1.36), Romania (1.39) and Hungary (1.41). Although Serbia (1.64) and Slovenia (1.52) performed relatively better, their fertility rates also remain substantially below replacement rate. The EU27 average stands at 1.34. Persistently low fertility, combined with increasing life expectancy, will accelerate population ageing. It is no secret that demographic developments pose a particular challenge not only to labor market and economic development but also to pension systems in CEE, which remain heavily dependent on public pay-as-you-go arrangements. A shrinking working-age population relative to the number of retirees will increase pressure on pension contributions, retirement benefits and fiscal sustainability. At the same time, increasing labor force participation, extending working lives and accelerating productivity growth through digitalization and AI adoption will become increasingly important to sustaining prosperity in the region.

Market movements

Today’s US Fed meeting is taking place against an extremely challenging backdrop. The bond markets (medium- and long-term interest rates) are extremely volatile. Brent price of oil touched USD 117 per barrel on Monday remain elevated amid persistent geopolitical uncertainties. Looking beyond the short-term developments, the macroeconomic data would suggest a rate hike. Nevertheless, we and the market do not expect an interest rate hike this week. The reason for this, in our view, is the mid-term elections the following week on November 3. With less than a week to go before the elections, the FOMC will not want to get drawn into the political fray and will therefore likely make a pragmatic decision. In Czechia, central banker Seidler said he would lean toward a rate hike at the November’s meeting as domestic demand has been resilient and energy prices have been elevated. Hungarian Finance Minister plans to submit the 2027 budget draft to parliament on Friday. The budget gap is planned for 4.5% of GDP next year down from above 7% projected for this year. Stepping in on fiscal consolidation path is part of achieving the goal of Eurozone membership. Fitch Ratings commented that euro adoption would be credit positive event. Fitch Ratings sees 2032 as the earliest possible date. CEE currencies have strengthened marginally on Tuesday.

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Erste Bank Research Team

Erste Bank

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