CEE: Retail performance varies across the region

On the radar

• Romanian central bank kept the policy rate unchanged at 6.50%

• Producer prices in Serbia grew by 0.6% y/y in March.

• Inflation rate in Hungary in March was reported at 4.7% y/y.

• At 11 AM CET Croatia will release producer prices in March.

Economic developments

The complete set of February's retail sales data was finalized yesterday. The performance of the sector has shown increased variability across the CEE region during the second month of the year. In Czechia and Hungary, we saw a solid growth in retail sales, being on par with the previous year's average. Retail sales also experienced real-term growth in Romania and Croatia, although a deceleration compared to 2024 is evident. On the other hand, slight contractions were reported in Poland and Serbia. In Poland, the retail sector's performance was especially disappointing, with real growth falling short of the anticipated 3% y/y increase. Slovakia reported a more significant, albeit expected, decline. The 2.6% y/y drop is the first after thirteen consecutive months of growth. This decline is primarily attributed to deteriorating consumer sentiment and the impact of early purchases made in December, as households anticipated price increases driven mainly by higher VAT.

Market developments

The Romanian central bank kept the key rate unchanged at 6.50%. Higher than anticipated inflation, fiscal situation and prolonged external markets instability are the main concerns of the central bank. We expect the central bank to resume cutting rates in August and deliver three rate cuts of 25 basis points each to 5.75% by the end of 2025. There are risks for less interest rate cuts subject to fiscal and political developments. CEE currencies continued to weaken against the euro on Monday. EURCZK moved to 25.27, EURHUF touched 407 while EURPLN is close to 4.30. Bond market showed mixed performance at the beginning of the week. Both FX and bond market are driven by global developments. The US Treasury Secretary Scott Bessent said that he hopes tariff rates will come down as negotiations get going with US trading partners. For countries that don’t retaliate, the current level of tariffs is at a maximum level, according to him. In the meantime, the European Union is proposing 25% tariffs on a selection of US goods. According to Hungary’s Foreign Minister, Hungary opposes EU counter-tariffs, while auto industry in Poland calls for cautious approach as well.

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