Resilience to global headwinds but risks persist

The region appears to have weathered the external headwinds relatively well in the first half of the year. Therefore, there is some good news for the region. GDP growth was revised up in Serbia and Slovenia compared to our previous CEE Macro Outlook. Furthermore, Hungary continues to benefit from a spur of optimism following the parliamentary elections and the change of government. In Croatia, Poland and Slovakia, slight downward adjustments were made. Finally, in Romania, the recession will be deeper than initially expected, as we revised our 2026 GDP growth forecast to -0.7%. A prolonged period of geopolitical tensions and persistently high energy prices continues to pose a risk to economic developments in the region, however. On the other hand, economic activity picked up visibly in the Eurozone in 3Q, improving the region's economic prospects beyond 2026. Global growth is also expected to pick up in 2027, which is positive for the CEE region. At this point, we expect growth to accelerate slightly next year.

A common feature of inflation developments across the region since the beginning of the year has been an acceleration during the spring, with inflation in most countries reaching a local peak around April or May. Since then, however, inflation has eased in several economies, while in others renewed price pressures pushed August inflation higher (Croatia, Czechia and Poland). The recent rise in oil prices is likely to bring inflation fears back, alongside rising expectations of monetary tightening. Another common feature is the decline in food prices in Czechia, Poland, Slovakia and Hungary. All in all, compared to our previous CEE Macro Outlook, average 2026 inflation was revised down in Czechia, Hungary, Romania, Serbia and Slovakia. In Romania, rapid disinflation is expected over the course of the third quarter of the year. The external environment remains a key risk to the inflation outlook, particularly the Middle East conflict and weather conditions.

The Czech National Bank continues to sound hawkish, and another rate hike is likely, bringing the key rate to 4% by the end of the year. In Hungary, on the other hand, we have seen a short monetary easing cycle, supported by low inflation and the strong Hungarian forint against the euro. We see rates continuing to fall toward 4.5% by the end of 2027. Hungary is taking steps toward Eurozone membership and is expected to lower its inflation target. Poland and Serbia are expected to keep rates stable. In Poland, such an outlook is conditional on commodity prices reversing their upward trend soon, in line with the forward curve. We see the risk of monetary tightening clearly rising, though. In Serbia, core inflation remains at the upper edge, limiting room for rate cuts. Finally, Romania should begin discussions on monetary easing once inflation falls below the key policy rate, which is expected around the turn of 2026 and 2027.

The Hungarian forint has been the clear outperformer, appreciating by around 5–6% since January. In the last two months, however, it has lost some of the momentum observed in the middle of the year. A strong commitment to Eurozone membership supports lower EURHUF levels in the medium term. By contrast, the Polish zloty has weakened by roughly 2%, with most of the depreciation occurring since June, while the Czech koruna has remained remarkably stable, hovering close to its January level. The Romanian leu, after a sharp adjustment in May, has been moving sideways. On the bond market, renewed concerns that commodity prices will remain elevated for longer are putting the long end of the curve under pressure again. Local factors are also playing a role in the development of 10Y yields. In Czechia, expected monetary tightening keeps long-term yields as high as the peak reached in March 2026. In Poland and Romania, challenging fiscal situations add to the pressure. In Hungary, on the other hand, yields have been declining.

In the special section, we zoom in on the impact of climate- and weather-related events. The 2026 weather story has been dominated by extreme heat and drought. Finally, for more details on specific country developments, follow our country-specific Macro Outlooks.

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