Fitch to review Romania’s rating

Poland will release the most interesting set of data, as industrial output growth for January will be published, alongside producer prices and January’s wage and employment growth. Data on the labor market will also be released in Croatia (December’s wage growth and January’s unemployment) and in Slovakia (unemployment). Further, we will see January’s inflation in Slovakia and Serbia as well as the current account balance in Serbia and Slovakia. On Friday after the market closes, Fitch will announce the rating decision on Romania. Fitch changed the outlook of Romania to negative in December in an unscheduled review. We believe that the rating will not change on Friday. We are convinced that rating agencies will wait until the outcome of the presidential elections and fiscal consolidation path afterward before undertaking any rating decisions. Finally, we have been revising our growth and inflation forecast as well as interest rate outlook for several CEE countries and will communicate the details in the CEE Growth Navigator report (to be released in the upcoming days).

FX market developments

CEE currencies kept strengthening last week amid news about the increasing possibility of a peace deal in Ukraine. The EURCZK moved toward 25.05, the EURPLN touched 4.16, and the EURHUF was briefly as low as 401. On top of the influence of global factors, in the case of the Polish zloty and Hungarian forint, the interest rate differential may support a strengthening of these two currencies. In particular, monetary easing in the course of 2025 has moved away as inflation surprised to the upside at the beginning of the year in both countries. Serbia and Romania’s central banks kept the key policy rates unchanged. In the case of Serbia, we have pushed back expectations for the first cut, which we now expect to see in May once global uncertainty eases a bit, while also forecasting a total of 75bp in cuts in 2025 compared to the 100bp we expected earlier. In Romania, monetary easing is likely to come even later and will depend on fiscal developments.

Bond market developments

There was minimal movement in yields on CEE bond markets last week, except in Hungary, where the curve shifted up by 10-20 basis points w/w. The significantly higher-than-expected January inflation reading, combined with more hawkish statements from the FED, has led to a repricing of market expectations regarding the number of rate cuts in Hungary. Currently, we do not expect the MNB to cut rates below 6% this year. This week, the Slovak debt agency will reopen four bonds (SLOVGBs 2028, 2034, 2035, 2045) and will continue to campaign for the upcoming retail bond issue. Romania will reopen ROMGBs 2027 and 2032, and offer T-bills. Poland and Hungary will conduct their regular bond auctions, with Hungary also selling T-bills.

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