Poland’s monthly data as tipping point for upward growth revisions

This week will be relatively light in terms of economic data releases. Labor market data will be published for several CEE countries, with Poland the first to release retail sales and industrial output figures for July. Growth acceleration is widely expected for both indicators. Combined with the surprisingly strong preliminary GDP growth reported for 2Q24 last week, these numbers could provide the final reassurance needed for upward revisions of Poland’s 2024 GDP growth.

FX market developments

While 2Q GDP flash estimates for several CEE countries generally disappointed, Poland’s strong GDP reading was an outlier and a positive surprise. This, along with elevated inflation, provides another reason for Poland’s MPC not to rush into monetary easing. This has given a tailwind to the Polish zloty, which strengthened against the euro and outperformed regional peers last week. The forint remains in range-trading mode, influenced by international market sentiment. The first two days of this week (Monday and Tuesday) are public holidays in Hungary. After this break, markets will focus on the upcoming rate-setting meeting on August 27, at which a pause in monetary easing is the most likely scenario, according to our view.

Bond market developments

Hungary’s 10-year government bonds started last week on a weaker note but at the end of the week 10-year yields edged down across all CEE markets except Romania. Romania faced weak demand in its recent 9-year ROMGB auction, with a bid-cover ratio of only 1.07. High year-to-date deficit numbers and the fragility of the coalition government ahead of approaching elections are concerns. The Ministry of Finance hinted that it might tap international bonds twice instead of once for the remainder of this year. This week, Romania is scheduled to reopen ROMGB 2031 and sell T-bills. Hungary will reopen HGBs 2027, 2029 and 2035, and offer 4-month T-bills. Poland will offer various bonds.

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