CEE Macro Weekly: Diverging fiscal trends

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TOP MACRO THEME(S):

• Poland keeps its growth engine running (p.3) – Poland’s economy remains resilient despite moderating growth. Our GDP nowcast points to 3.3% y/y growth in 3q26, down from 4.1% in 2q26. Following upward revisions to historical data, we now forecast GDP growth of 3.6% in 2026.

WHAT ELSE CAUGHT OUR EYE:

• HUN: The MNB kept its policy rate at 5.50%, unchanged since August, maintaining its wait-and-see stance. The Bank remains cautious despite low inflation (1.6% y/y in September), mainly due to geopolitical risks and uncertainty surrounding energy prices. Financial market stability also remains an important consideration, particularly stable bond risk premia and the forint exchange rate. According to Governor M.Varga, the decision also took into account the revised inflation target (from 3.0% to 2.5%) over the monetary policy horizon. Further rate cuts cannot be ruled out, but will depend i.a. on forint stability and financial market reactions to the medium-term fiscal outlook. Governor M.Varga gave a positive assessment of the 2027 budget bill and the planned deficit reduction path.
• CEE: Fiscal trends across CEE diverged in 1h26. Poland made progress towards consolidation, Romania's adjustment stalled, while Hungary and Czechia recorded wider deficits. Poland’s GG deficit narrowed to 6.7% of GDP in 2q26 from 7.2% at end-2025 (on a rolling four-quarter basis). This suggests the full-year deficit could come in below the government’s projection of 7.1% of GDP, a positive signal ahead of S&P's rating review on 6 November. Revenues rose to 44.2% of GDP from 43.6%, supported by higher CIT on banks and robust income growth, while expenditures remained stable relative to GDP. In Romania, the deficit widened to 7.4% of GDP from 6.9% in 1q26, as weak growth constrained revenues while investment and debt-servicing costs increased. The 2026 government's 6% target looks increasingly unlikely, with persistent fiscal and external imbalances adding to economic risks. Hungary's deficit widened to 6.3% of GDP from 4.7% in 2025, due to weaker revenues and higher social spending despite investment cuts. Following a projected 7.5% deficit in 2026, the government targets 4.9% in 2027, 4.0% in 2028, 3.4% in 2029 and 2.8% in 2030. Government plans to frontload consolidation in 2027, making next year's budget crucial to the plan's credibility. In Czechia, the deficit rose to 2.6% of GDP from 2.2% in 2025, due to higher investment and social transfers, but it remains the lowest in CEE, close to the government's 2.7% target for 2026.
• ROM: Romania finally has a new government. Parliament approved L.Niculescu’s minority cabinet with support from PSD, PNL and UDMR, while AUR and USR voted against. Comprising only PSD and independent ministers, the government will rely on fragile parliamentary support. Its priorities include fiscal consolidation and securing final RRF disbursements by year-end. Moody’s stressed that political stability and continued fiscal consolidation are crucial for Romania’s creditworthiness.

THE WEEK AHEAD:

• This week’s CEE economic calendar is dominated by three key releases, all scheduled for Friday. Poland’s flash CPI inflation for October is expected to decline to 3.7% y/y from 4.1% in September, driven by fuel tax cuts. Underlying inflationary pressures should remain contained, with no visible second-round effects so far. We will also see flash 3q26 GDP estimates for Hungary and Czechia, with growth in both economies expected to come in at around 1.7% y/y.