Inflation in Serbia, industry and retail data in Poland

The most interesting data will be published on Monday in Serbia (January inflation) and on Tuesday and Wednesday in Poland. Poland will report the performance of the industry and retail sectors in January. Apart from that, we will see January unemployment rates in several CEE countries (Slovakia, Croatia, Hungary and Poland) as well as wage growth in Croatia and Poland. Finally, on Friday, after market closes, Fitch is scheduled to evaluate Czechia’s rating and outlook. As for other news, we revised our growth and inflation forecasts across CEE. In particular, we now see the inflation rate in Czechia lower on average this year compared to the previous estimate and the Hungarian economy to develop at a much slower pace in 2024 (2.0% vs. 3.3% previously). A similar revision was done in Romania, where GDP growth dynamics are expected to be lower in 2024 as well as 2025, in contrast to previous estimates.

FX market developments

CEE currencies have been weakening against the euro throughout the last week. We see the influence of global factors, as inflation in the US was published. Locally, Czech central bankers delivered some hawkish comments after January’s inflation figure surprised to the downside, arriving at 2.3%. Governor Michl underlined the ongoing hawkish stance of the policymakers, while Zamrazilova said that victory in the fight with high inflation cannot be announced yet. We believe, however, that the Czech central bank has the most space to cut interest rates among all central banks in the region. In Poland, on the other hand, MPC member Kotecki commented that the space for rate cuts will be limited this year and will depend heavily on the inflation development.

Bond market developments

CEE bond markets showed a mixed performance last week. Hungarian 10Y yields edged up slightly (+15bp w/w), while the short end of the CZGB yield curve moved down in reaction to the surprisingly low January inflation reading. Romania sold its first green bonds worth EUR 2bn maturing in 2036 (priced at MS+300) along with another 7Y Eurobond worth EUR 2bn (MS+270). Combined with the dollar-denominated bonds issued in January (USD 4bn), Romania has most of its foreign financing needs completed for this year. Romania has been frontloading issuance on both international and domestic markets to avoid political risk related to the election calendar in the second half of the year. This week, Slovakia will reopen SLOVGBs 2027, 2032, 2033 and 2047, while Poland will offer POLGBs 2026, 2029, 2033 and a 2029 floater. Romania will reopen ROMGBs 2027 and 2038 and Czechia will sell CZGB 2043 along with T-bills. T-bills will also be sold in Hungary.

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