GDP data to draw all attention

After getting a taste of 2Q GDP figures in the previous weeks, including the Czech flash estimate and EU/Eurozone numbers, it is time to shift our focus to the CEE region. The first 2Q23 GDP release, expected to report around 1.5% y/y growth, will come from Slovakia on Tuesday. Although household consumption is facing some challenges, Slovakia's strong foreign trade is expected to have driven the country's economic performance in 2Q23. On Wednesday, Romania, Hungary and Poland will report their figures. For Romania, we foresee 0.3% q/q growth, mainly supported by services for businesses, which would translate to 2.5% y/y. For Hungary and Poland, the q/q estimates are at 0% and -1.7%, respectively (that is -1.4% y/y and 0.7% y/y). Domestic demand has declined in both countries, but positive net exports are expected to partly offset the falling internal demand. Alongside GDP data, inflation figures are expected to be published in Slovakia (forecasted at 9.6% y/y) and Croatia, industrial production in Romania, and PPI in the Czech Republic.

FX market developments

Throughout the last week, the FX market showed a mixed performance. The Czech koruna weakened marginally against the euro, while the Hungarian forint and Polish zloty strengthened against the euro. While, in the case of the Polish zloty, the move was rather marginal, the EURHUF moved down more visibly. The main reason for the weakening of the Czech koruna is the aftermath of the central bank meeting, at which the CNB formally ended the intervention regime announced in May 2022 and resumed the program of sales of part of the income on international reserves. This week, the 2Q23 GDP data will be in focus in most of the CEE countries, but we do not expect it to have a major impact on the FX market performance.

Bond market developments

The bond market showed a mixed performance over the last week. Hungarian, Polish and Slovak long-term yields moved down, while those of Romania increased. The week-to-week changes were rather small, however. In Poland, the downward move was the biggest among the peers, as expectations that monetary easing is to begin in autumn have been gradually increasing. The weak performance of the economy in the second quarter may strengthen the dovish wing in the central bank. Czech government, amid falling inflation and market’s bets for interest rate cuts, sold CZK 8 billion worth bonds and CZK 8.58 billion worth bills and the demand was solid. This week, the governments will not be too active on the bond market, with Hungary and Croatia scheduled to sell bills, while Czechia and Romania will sell bonds.

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