CEE: Global trends shaping 2025 growth outlook

Looking at the whole 2024 economic performance, Croatia and Serbia experienced the strongest growth, at close to 4%. On the other hand, Hungary underperformed, having expanded by 0.5% in 2024. Romanian economic development disappointed (0.9% in 2024) as well, despite dynamic real wage growth. We expect 2025 GDP growth to accelerate in all CEE countries except for Croatia and Slovakia. In Croatia, we expect a slight cooling off, while Slovakia should sustain a similar pace of growth. Average growth in the region should be 0.6 percentage points higher in 2025 (2.6% vs. 2.0% in 2024). The acceleration of growth should be driven mainly by stronger growth of investment. Unfortunately, the recovery is not going to be as dynamic as we expected at the end of 2024. We revised the full-year growth forecast downwards in several CEE countries already after seeing 4Q24 flash estimates.

We continue to see tariffs as a key downside risk to our growth forecast. We keep watching the sentiment indicators and remain worried about declining consumer confidence, in particular. Assessment of financial situation of households has worsened as well lately. On the other hand, plan to ReArm Europe (activating escape clause and introducing the new instrument worth EUR 150 billion) in combination with prospects of German huge infrastructure spending in the coming years should provide a fiscal impulse and boost the growth. Markets have already began to price in such scenario. We adjusted our yield forecast accordingly.

We revise our 2025 inflation forecast upward in part of the region. The biggest upward revision of headline inflation took place in Hungary, where we see the 2025 average at 5.0%, compared to 4.1% previously. Inflation was revised upward and is expected to be higher by roughly 0.5 percentage points in Croatia and Poland compared to our expectations from the end of 2024. In Slovakia, due to higher indirect taxes and energy prices, we may see inflation rising toward 3.7% in 2025, compared to 2.9% in 2024. Average inflation should decline only in Romania and Serbia in 2025. While we still see monetary easing coming in the whole region in 2025, in most countries, it is likely to come later than we initially expected. The size of monetary easing will be smaller as well.

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