CEE: Labor market slack remains stable

Erste Bank Research Team Erste Bank

On the radar

Producer prices in industry declined by 0.8% y/y in Czechia during May.
At 11 AM CET, Croatia releases final inflation in May.
In the afternoon, Poland will show core inflation in May.

Economic developments

Labor market slack in the EU (all people who have an unmet need for employment, including unemployed people) amounted to 10.9% of the extended labor force aged 20-64 in 1Q25 marking a 0.1 percentage point increase compared to the last quarter of the previous year. In the CEE region, labor market slack remained flat at 7.5% in 1Q25. Such development in the region as opposed to the entire EU is yet another sign of ongoing tightness of the labor market in the region. Looking from a broader perspective, labor market slack decreased visibly in the region and to a bigger extent compared to the whole EU. Over last decade, labor market slack dropped by roughly 10 percentage points in CEE8 while in the EU by 7.5 percentage points.

Market developments

This week, there are no market-related events in the region. EURCZK is below 25, EURHUF close to 402 and EURPLN at 4.26. Long-term yields declined over last week. In Hungary Daniel Palotai was nominated to become the fourth deputy governor of the central bank, a position created this month after Parliament passed an overhaul of the institution’s leadership. In Poland, the policy maker Kotecki said inflation will likely fall toward the central bank’s target in July supported by the statistical effects and unexpected gas tariff cut. Furthermore, the new projection should show inflation staying within the tolerance band more permanently. He believes that a 50 basis points cut will be delivered this year.

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Erste Bank Research Team

Erste Bank

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