CEE Macro Weekly: CPI has increased across CEE

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TOP MACRO THEME(S):

• Uneven race to absorb EU funds in CEE (p.3) – CEE countries differ over EU fund absorption: Hungary remains the main laggard, Romania faces implementation delays, while Czechia leads in RRF disbursements and cohesion project contracting. Poland has seen an acceleration in EU fund payments, but absorption remains relatively low.

WHAT ELSE CAUGHT OUR EYE:

• POL: The National Bank of Poland has again submitted requests to President K. Nawrocki to appoint M.Kightley, L.Kotecki, P.Litwiniuk and M.Zarzecki to its Management Board. The appointment of NBP Management Board members by the President requires the countersignature of Prime Minister D.Tusk, who earlier this year declined to countersign the appointments of the four candidates. The Board currently comprises six members in addition to the Governor. Meanwhile, A. Lipinski’s term expires in early November, while M. Gajęcka’s ends at the turn of the year. Unless A. Lipiński is reappointed or a replacement is appointed, the number of Management Board members will fall below the statutory minimum of six, excluding the Governor.
• POL: Finance Minister A.Domanski said that a decision on whether to extend the CPN package (which reduces VAT and excise duty on fuels) into 2027 would be made in December this year.
• POL: Fitch Ratings raised its forecast for the general government (GG) deficit in 2026 to 7.3% of GDP (from 6.9% of GDP forecast in August) and in 2027 to 7.1% of GDP (from 6.7% of GDP). For 2028, the agency forecasts a deficit of 6.5% of GDP. It also raised its forecast for GG debt in 2028 to 73.4% of GDP, compared with 72.7% of GDP projected in August. In its comment, Fitch noted the risk of further pre-election fiscal easing, while the scope for additional offsetting revenue measures remains limited by the risk of a presidential veto. In the agency’s view, the lack of cooperation between the government and the president constrains Poland’s ability to implement economic policy and reforms effectively. Fitch maintains Poland’s long-term rating at A− with a negative outlook. The adverse revisions to the fiscal forecasts make a return to a stable rating outlook more remote and increase the risk of a downgrade. Fitch has no further reviews of Poland’s rating scheduled for this year. We expect the next update in February 2027.

THE WEEK AHEAD:

• We expect the MNB to leave interest rates unchanged on Tuesday. Amid elevated geopolitical risks and uncertainty over the inflation outlook, a wait-and-see approach appears warranted.
• In Poland, industrial and construction output growth is likely to moderate in September due to less favourable base effects, while high energy prices should push PPI inflation higher. September retail sales growth should remain solid, supported by resilient consumer demand. Labour market data are expected to show some normalization in wage growth in September amid subdued labour demand, while the unemployment rate should remain stable at 5.8%.