Lithuania outperforms the Baltic region
On the radar
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Central bank in Poland kept the policy rate unchanged at 5.75%. Today Governor Glapinski holds a press conference.
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Core inflation in Poland eased to 4.0% y/y in December.
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Final inflation for December was confirmed at 3.4% y/y in Croatia.
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Producer prices in Czechia increased by 2.8% y/y in December, well above market consensus.
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At 10.30 AM CET current account balance will be released in Slovakia.
Economic developments
Today, we would pay attention to the latest outlook summary on Baltic region (Baltics | Lithuania outperforms the region). Estonia is the only Baltic country with an economic contraction expected in 2024, with GDP not growing for the third year in a row. Latvia is also facing economic stagnation after positive growth revisions in 2023, while Lithuania is expected to grow by more than 2% in 2024. The economies are expected to return to growth in 2025, with Lithuania leading the way with an expected growth rate three times larger than its peers. Inflation remains stable in Lithuania and Latvia, while Estonia is projected to reach the target only in 2026. It is mostly due to the fact that Estonia has been experiencing higher inflation due to tax increases, whereas its peers have inflation pressures already under control. Budget deficits in the Baltic countries are expected to be around the Maastricht Criteria threshold, influenced by defense spending for the years to come.
Market developments
In the first meeting of the year, there were no surprises in Poland as the key policy rate was maintained at 5.75%. The press release following the meeting adopted a rather hawkish tone, indicating among others the risk of further unfreezing of energy prices in the second half of 2025. We will closely monitor today’s press conference by the Governor, as it may provide some clarity on the uncertain trajectory of monetary policy. At this point the consensus that interest rate cuts may begin in the first half of 2025 seems shaky. Polish government sold record 82.6 billion zloty of bonds to retail savers last year compared with 48.7b zloty sold in 2023 according to data from Finance Ministry. EURHUF is at 412 while EURPLN at 4.26. EURCZK moved up to 25.29. While the long-term bonds in the region declined, the 10Y interest rate in Romania edges higher amid political and fiscal uncertainty.
Author
Erste Bank Research Team
Erste Bank
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