Real wages grow in most of CEE countries

• In Czechia, real wage growth landed at -0.8% y/y in 3Q23.

• Today, Slovakia will release the 3Q23 GDP structure, while Romania will publish PPI index in October.

• In the afternoon, Polish central bank will announce the interest rate decision.

Economic developments

Out of all the countries in the region, Czechia and Slovakia are the only ones with negative real wage growth in recent months. Slovakia reported a real wage growth of -0.7% y/y in September, while data released on Monday for Czechia showed a drop in real wages by -0.8% y/y in the third quarter. In Czechia, real wages have been contracting for the second consecutive year. This development is considered anti-inflationary, particularly when combined with the increasing unemployment rate over the past year. The situation in Czechia and Hungary is unique when it comes to unemployment rate, as it went up compared to the previous year, unlike other countries where it went down. Low unemployment rate in combination with wage pressure, along with dynamically falling inflation, turned real wage growth positive in most of the CEE countries.

Market developments

Today, Polish MPC holds a rate setting meeting and we expect policy rate to remain unchanged in December at 5.75%. The central bank announced a pause in the easing cycle as, according to some MPC members, inflation in Poland is persistent leaving no room for further rate cuts. On the FX market, the CEE currencies have been slightly weaker against the euro at the beginning of the week. The long-term yields showed mixed performance. Romania sold RON 1.335 billion bonds maturing in 2027. Bonds were priced to yield 6.57%.

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