Growth navigator in response to 2Q26 GDP data

The first half of the year proved to be relatively solid in most of the region. In response to 2Q26 flash growth estimates, we revised our 2026 GDP forecasts up in Hungary (1.7%). In Serbia and Slovenia, risks are clearly to the upside as well, given the very strong development in the first half of the year. In other CEE countries, we mostly maintain our 2026 projections. Only in Slovakia and Romania do we see risks to the downside to our current full-year expectations. Overall, the risks to our growth forecasts are related to global developments and the ongoing conflict in the Middle East. Risks to CEE economic development may also stem from possible power supply constraints if the problem with water levels in Europe continues or deepens.

2026 average inflation is expected to be marginally lower in the region compared to the previous year. Fears of inflation have luckily not materialized, although commodity prices remain elevated. Average 2026 inflation was revised down in Czechia, Hungary, Serbia and Slovakia. In Serbia, further downward revision is likely. In Romania fast disinflation is expected over the course of second half of the year. Recent development of commodity prices continue to pose an upward risk to inflation forecasts.

There is some divergence in monetary policy direction in the region. While Hungary began a monetary easing cycle, supported by low inflation and the strong HUF against the euro, the Czech National Bank keeps sounding hawkish. Although headline inflation is below the central bank’s target, central bankers seem to be worried about wage pressure and core inflation developments. We do not assume a rate hike this year (though we note it may be a close call. In the longer-term horizon, we see a continuation of monetary easing in Hungary, reversal of the rate hike in Czechia and rate cuts in Romania once inflation falls visibly. Poland and Serbia are to keep their rates stable. However, in Serbia, expected downward revision of inflation may open space for easing in 1H27.

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