First quarter growth data to be completed for CEE

This week will bring, among other releases, a new batch of 1Q GDP data. On Monday, Romania will release its March trade balance, followed by Serbia's April CPI data. Tuesday will feature Romanian CPI, where the annual figure is expected to decelerate but remain high, influenced by a significant drop in energy prices. Slovakia will also release wage growth data. Wednesday will bring current account balance data for Romania and Serbia, as well as Romanian industrial production data, which is anticipated to show a deeper annual decline due to a base effect. Slovakia will release its inflation data on the same day. Thursday is GDP day, with 1Q GDP releases from Romania, Slovakia, Slovenia and Poland. Romanian GDP growth is expected to be modest, with slowing consumption and contractionary net exports, though investments might provide a boost. Slovakia and Poland will also release initial estimates of their economic performance, with annual growth expectations of around 3% for Poland and 1.2% for Slovakia. In Slovenia, we expect GDP to maintain stable growth dynamics also going into 1Q25. The week will conclude with the Czech PPI and Romanian central bank decision, where stability is expected. After market hours, Fitch will publish its sovereign rating revision of Slovakia. The second round of presidential elections in Romania is planned for May 18, with far-right Simion the frontrunner.

FX market developments

Romania was in the spotlight last week following the victory of hard-right presidential candidate George Simion in the first-round vote, which led to the collapse of the government. In response, the Romanian leu breached the central bank's target level of 5 leu per euro. Over the past week, the NBR has likely spent approximately EUR 6bn of its FX reserves to support the leu. The current critical level for the NBR appears to be 5.15, with the leu stabilizing at around 5.12, reflecting a depreciation of approximately 2.8% from the previous week. In Poland, National Bank Governor Glapinski indicated a pause in rate cuts in June and a transition to a cycle of 25-basis point rate cuts. As we noted earlier last week, the market had overestimated the extent of the rate cuts, leading to a 30bp increase in near-term FRAs, while the zloty appreciated to 4.25 against the euro. In Hungary, the exchange rate will be influenced by the movements of the EUR/USD exchange rate.

Bond market developments

Over the past week, 10-year yields remained relatively stable, except for Romania. Due to political instability, Romania's 10-year yield was approximately 80 basis points higher on Friday than a week ago. The S&P has indicated that Romania could risk losing its investment grade if the political turmoil hampers the country's ability to reduce its fiscal deficit and restricts external financing sources following the government collapse. In a test of investor interest in Romanian debt, the Finance Ministry successfully sold the planned RON 500mn in 8-month T-bills last Thursday. The yields surged to 8.21%, compared to 6.7% at an auction of 11-month bills last month. Looking ahead, this week will feature several bond and bill auctions. On Monday, Romania will hold a bond auction. Tuesday will see bond and bill auctions in Serbia and Hungary, respectively. On Wednesday, Poland and Czechia will conduct bond auctions, followed by bill auctions in Czechia and Romania on Thursday. S&P affirmed the A- (sta) rating for Poland and Moody’s affirmed A3 (sta) rating for Croatia

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