CEE Macro Weekly: A month full of suprises

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TOP MACRO THEME(S):

• Data to dream of (p.3) – Economic activity data for October indicate that the start of 4q25 in the Polish economy was solid and exceeded expectations, while inflation developments in November proved better than expected.

WHAT ELSE CAUGHT OUR EYE:

• CEE: European Commission informed that with regard to Poland and Romania the excessive deficit procedure has been temporarily suspended, meaning that no further procedural steps are taken at this stage but that the ongoing procedure remains open. Members remain bound by Council’s recommendation. Hungary was mentioned among the group of countries at risk of non-compliance. Czechia was assessed as compliant with fiscal rules.
• CZE: ANO party leader A.Babis revealed the list of ministers after meeting with President P.Pavel. On the ANO side, many figures are the same as in the ANO–CSSD government of 2018–2021. Among the key returning ministers are K.Havlicek (industry) and A.Schillerova (finance), which may indicate a similar course of economic policy. As previously announced, the ministers nominated by SPD are experts rather than politicians and have taken over the defence, agriculture and transport portfolios. The leader of Motorists, P.Macinka, has been nominated as foreign minister. F.Turek from Motorists, whom President Pavel did not want to see in the cabinet, was nominated as environment minister, which may signal a shift in Czech’s energy policy towards fossil fuels such as coal. President started conducting interviews with cabinet nominees today. He cannot formally decline a nomination but can prolong the process. At the same time, the absence of a single nomination does not preclude the formation of a government.
• CZE: Lower house of the Parliament rejected the 2026 budget bill with the votes from the new ruling coalition (ANO, SPD, Motorists). The reason behind the rejection of the bill is the argument that costs are not fully covered by revenues – according to A.Shillerova, the gap stands at CZK 96 bn. The outgoing finance minister, Z.Stanjura, argued that under the Fiscal Responsibility Act the maximum deficit target was CZK 237 bn, while the difference compared with the official deficit target of CZK 286 bn comes from defence spending above 2% of GDP, which is excluded from the EU deficit limits. Nevertheless, some issues had previously been raised about the inadequate financing of transport infrastructure projects. If a budget revision were to take place, it would most likely not be on the scale that an ANO government would want. It is very likely that the 2026 budget bill will not be passed on time, so 2026 will start with a provisional budget.

THE WEEK AHEAD:

• In Poland, the main focus will be Wednesday’s MPC meeting. After the favourable inflation surprise (more on p. 3), the probability of 25bp cut in December increased. In addition, we will get a detailed breakdown of GDP in 3q25. We assume solid consumption growth and a return to y/y increases in fixed investment outlays.
• Full GDP estimate will also be published in Hungary. The week will start with the release of PMI indices for the CEE. The preliminary estimate of CPI inflation in Czechia will also be worth watching.