Productivity growth in CEE

On the radar

• Fitch Ratings affirmed Hungary’s rating and negative outlook.
• Industrial output will be published in Czechia at 9 AM CET and trade balance is due.
• Share of unemployed will be released at 10 AM CET in Czechia.
• Budget balance will be released in Hungary.
• Serbia will release producer prices at noon CET.

Economic developments

In the first quarter of 2026, labor productivity in the EU increased slightly by 0.1% y/y based on both persons and hours worked. Such development suggests a slowdown in productivity growth from around 0.8% y/y in the previous quarter. In the region, on the other hand, productivity growth per person grew in 1Q26 by 0.35% y/y on average that is slight acceleration compared to the end of 2025. Productivity growth across the region was rather homogenous. While Czechia and Croatia experienced slight decline of productivity per person, other countries experienced growth. Looking from a broader perspective, productivity growth in the CEE8 region has substantially outperformed the EU average since 2015. The CEE8 average index (2015=100) rises to approximately 123 by 1Q26, while the EU index increases only modestly to around 105. This implies a cumulative productivity gain of more than 20% in CEE8, compared with only about 5% in the EU, pointing to a continued productivity convergence process in the region. Such development is supported by the post-pandemic recovery that was considerably stronger in CEE8. The CEE8 index rebounded quickly and moved onto a higher path. The EU recovered as well, but the rebound was much less dynamic, and productivity growth subsequently stabilized at a low rate.

Market movements

Fitch Ratings affirmed Hungary’s rating and negative outlook. Hungary 'BBB' rating is supported by strong structural indicators, including GDP per capita well above the peer median. These strengths are balanced against high public debt, a record of unorthodox economic policies, vulnerability to energy prices, and a worsening of governance indicators in recent years to closer to the 'BBB' median. Factor that could lead to positive rating change is increased confidence in the government's ability to implement institutional reforms or fiscal consolidation measures sufficient to stabilize general government debt/GDP ratio over the medium term. Fitch Ratings also mentions improved institutional environment and policymaking that should support a strengthening of medium-term growth as a second factor. On this note, Hungary’s justice minister will file legislation this week that will satisfy the European Union’s 27 so-called super milestones on the rule of law that are a precondition for the release of frozen funds. Further, The European Investment Bank sees scope for significantly expanding its lending to Hungary after European Union is expected to unlock frozen funds. As for other news, minutes from the May central bank meeting in Poland show members view the inflation outlook as highly uncertain even in the short term, citing fuel prices, the Middle East conflict, and possible fiscal/regulatory measures. In Czechia, wage growth significantly exceeded the CNB's latest forecast that we see as a hawkish signal for monetary policy despite May’s inflation cooling to 2.1% y/y.

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