Fiscal discipline varies across CEE

On the radar

• Central bank in Poland left policy rate stable at 3.75%.
• Today, central banks in Romania and Serbia hold rate setting meetings and stability of rates is broadly expected.
• Inflation in Hungary increased less than was expected to 1.6% y/y in September.
• In Czechia, Industrial production increased in real terms by 2.6%, y/y in August.
• The trade balance of goods in August 2026 ended in a deficit of CZK 5.3 bn in Czechia.

Economic developments

Today, we shortly discuss the fiscal stance of CEE countries and their financing needs as an excerpt from the latest CEE central banks lean toward wait-and-see mode. Hungary and Romania are the only CEE countries likely to reduce their fiscal deficits next year. Further, Poland and Slovakia have effectively given up on consolidation in an election year. While Slovakia is likely to loosen its fiscal stance, Poland has hardly any headroom to increase its deficit, as it already has the largest fiscal deficit in the EU and could risk negative rating action. Czechia is going to use its fiscal space, although not necessarily for investment, as presented. Croatia, Slovenia and Serbia are expected to keep their deficits broadly unchanged at close to 3% of GDP. As demand for long-term securities has dented on global markets and borrowing costs soared, debt agencies started to be more flexible and selective in their offerings. There were more short-term papers and floaters on offer. All of the CEE countries have at least two thirds of their financing needs for 2026 secured.

Market movements

The Poland’s central bank left interest rates unchanged, as expected. The main rate is still 3.75%. The changes to the post-meeting statement are in our view just technical and do not reveal any change to the wait-and-see stance of the Council. Today, Governor Glapinski holds a press conference. In Romania and Serbia central banks will decided on key policy rate and we expect stability of rates in both countries. In Romania, PM-designate Luca Niculescu should open coalition talks with PSD, PNL and UDMR, having nine days to present a cabinet and program. Failure to form a government would raise the prospect of Romania's first snap parliamentary elections after a five-month deadlock without a functioning government.

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