GDP releases will show 2024 economic performance

Several CEE countries (Hungary, Poland, Czechia and Serbia) will release GDP data that will allow us to see how the countries performed in 2024. In Hungary, we expect to see weaker than expected economic growth in the fourth quarter. In other countries, we do not expect major surprises. Another important event is the central bank meeting in Hungary, from which we expect no change in the key policy rate, given the recent inflation and exchange rate development. Other than that, we will see December’s performance of the industry and retail sector in Croatia, Serbia and Slovenia. Further, December’s unemployment rate is due in Poland and Romania, as well as producer prices in Slovakia and Hungary. Finally, on Friday after markets close, Fitch is scheduled to review its Serbia rating. Given the positive outlook, we see a non-negligible chance for a rating upgrade. Macroeconomic developments support an upgrade already in January, but the political tensions may become the key argument for holding off with such a decision until later this year.

FX market developments

The CEE currencies have strengthened visibly against the euro over the last week. The EURHUF moved below 410 and the EURPLN hit a five-year low at 4.21. While the common trend suggests that global factors were in play, in the case of the Polish zloty, the hawkish stance of the central bank and likely delay in interest rate cuts beyond March 2025 support a stronger zloty. The recent comments from the Polish central bankers suggest that July 2025 could be the moment to begin monetary easing. This meeting will take place after presidential elections and is associated with the publication of inflation and growth projections that could justify a change in the monetary policy stance. This week, the Hungarian central bank holds a rate setting meeting and we see the key interest rate stable at 6.5%. Inflation in December surprised to the downside and, in general, the EURHUF remains at high levels.

Bond market developments

Government bond yields in CEE dropped last week, amid a slightly weaker USD. Speculation on a possibly milder setup of import tariffs by the new US president and confirmation of the determination of the ECB to cut interest rates at this week’s meeting could be supportive to CEE bond yields as well. HGBs bonds outperformed the regional peers last week, although the Hungarian central bank is to keep rates unchanged this week. Last week, the Serbian Ministry of Finance successfully placed a new 10Y RSD benchmark bond on the local market with a size of EUR 951mn. The next RSD auction is scheduled for March. This week, Czechia and Romania are to reopen CZGBs 2032, 2034, 2040 and ROMGBs 2026, 2031 and 2035, respectively. On top of that, they will sell T-bills, as will Hungary. Poland and Hungary will offer various T-bonds in their regular auctions.

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