Retail Sales mostly grew in the first quarter

Erste Bank Research Team Erste Bank

On the radar

National Bank of Serbia kept the policy rate unchanged on Friday at 5.75%.
In March, Romania reported trade deficit worth 2836.2 million euro.
Today, Serbia will publish inflation data for April.
Ratings of Poland and Croatia were affirmed by S&P and Moody’s, respectively.

Economic developments

Today, we look at retail sales performance during the first quarter of this year, following the completion of data collection from all CEE local offices last week. For a more accurate cross-country comparison, we use Eurostat data on the volume of retail trade, excluding motor vehicles. The highest annual growth in retail sales during the first quarter was observed in Czechia and Croatia. Although Eurostat is still missing March data for Czechia, local sources indicate a solid year-over-year increase of 3.4% for that month. Romania, Hungary, and Slovenia also reported higher retail sales growth than the EU average during the first quarter. Conversely, Poland and Slovakia reported disappointing results, with negative real retail sales growth. In Poland, local statistical office data contradict Eurostat figures, showing slight positive growth in Q1. However, in Slovakia, both local and European sources confirm negative developments. The primary factors contributing to the decline in Slovakia are higher VAT and weaker nominal wage growth, with the transactional tax potentially affecting only the second-quarter data, as it came into force in April.

Market developments

At the end of last week, the Romanian FX market showed signs of stabilization as the central bank successfully kept the EURRON exchange rate below 5.12. Additionally, 10-year ROMGB yields closed the week at 8.21%, recovering from a peak of 8.5% on Thursday. Money market rates remain elevated, with 3-month rates at 7.3% and a weekly increase of 140 basis points, as FX interventions drained RON liquidity from the market. On Friday, rating agencies provided no surprises: S&P affirmed Poland's A- rating, and Moody’s affirmed Croatia's A3 rating, both with stable outlooks.

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Erste Bank Research Team

Erste Bank

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