CEE Macro Weekly: A tale of two economies

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TOP MACRO THEME(S):

• Growth leader and laggard in CEE (p.3) – the latest GDP data highlight a widening divergence in CEE region, with Poland sustaining a balanced expansion while Romania slips into technical recession.

WHAT ELSE CAUGHT OUR EYE:

• ROM: According to media reports, the President of Romania is considering four options for the formation of a new government: a minority government led by the PSD, a minority government led by the PNL, a technocratic government, or a government headed by a technocratic prime minister. The reappointment of I.Boloyan is not being considered. The President aims to nominate a prime ministerial candidate by the end of May. President will hold consultations with parliamentary parties on Monday.
• ROM: As expected, the NBR left interest rates unchanged, with the policy rate remaining at 6.50%. The press release referred to the new macroeconomic projection, the details of which will be published next week. According to the NBR, inflation in 2q26 will exceed previously projected levels due to higher fuel prices. A substantial downward correction is expected in 3q26, after which inflation should decline gradually, re-entering the target tolerance band in 3q27. The central bank indicated that disinflationary pressure should stem primarily from the aggregate demand contraction resulting from fiscal consolidation. However, it also stressed that, under the current political conditions, further fiscal consolidation remains subject to high uncertainty.
• CZE: President P.Pavel signed a bill which would allow a hard cap on fuel prices. The current mechanism covers margins only. A hard price cap could remain in place for up to 12 months, although in practice this deadline may be extended. At this stage, it remains unclear whether fuel retailers will receive compensation; otherwise there is a risk of fuel shortages.
• HUN: Finance minister-designate A.Karman said the government would need about six weeks to assess the true state of the public finances. Revision of 2026 budget will be presented by the end of the summer (the deficit was supposed to reach 5% of GDP, although after becoming familiar with government documents P.Magyar signalled that it could reach almost 7% of GDP), while draft budget for 2027 will be ready by the end of October, slightly later than usual. A.Karman expressed his confidence in preventing any loss of the EU funds as well as finding savings in public procurement, cutting government propaganda costs, as well as debt servicing costs.
• POL: In March, the current account deficit came in lower than expected, at EUR 234m. On a rolling 12-month basis, the deficit narrowed to 0.8% of GDP from 0.9% of GDP in February. Exports increased by 7.4% y/y, while imports rose by 3.8% y/y, with fuel imports recording particularly strong growth, reflecting both higher fuel prices and inventory accumulation.

THE WEEK AHEAD:

• The week will be dominated by April data on economic activity in Poland. The calendar effect was neutral last month. Our forecasts point to solid, although slower than in March, growth in industrial production (4,5% y/y), while construction activity may see a slight acceleration (to 1,2% y/y). In the labour market, we expect employment to continue declining at the same rate as in March (-0,9% y/y), while wage growth should remain close to 6%.