CEE Macro Weekly: Downward revisions to growth forecasts

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TOP MACRO THEME(S):

• CEE leads the EU in expansionary fiscal policy (p. 3) – CEE countries ended 2024 with high fiscal deficits, driven by defense spending, social commitments, and slowing revenue growth. Plans for 2025 point to continued high deficits, especially in Romania and Poland.

WHAT ELSE CAUGHT OUR EYE:

• HUN: S&P kept the BBB- rating on Hungary, yet revised its outlook to negative from stable. Thus, according to S&P's classification, Hungary joins Romania in having the lowest credit rating in CEE-4. The revision reflects increasing risks to fiscal and external stability due to trade protectionism, weaker global demand and elevated interest spending. Potential downward revision of the rating would reduce it to a speculative grade of BB.
• CZE: Deputy Governor of the CNB, J.Frait, stated that the policy rate could stand at 3.50% in 2h25 (implying room for another 25bp cut), which would allow space for further adjustments if needed due to global trade disruptions. We believe that the 25bp cut will take place at the next meeting in May.
• HUN: Z.Kurali has been nominated for the post of MNB’s Deputy Governor, which he would take over after serving as the head of the state Debt Management Agency. His nomination has been approved by the parliamentary economic committee.
• CEE: IMF has slashed its 2025 GDP forecasts for the CEE region due to global trade disruptions. The scale of downward revisions varied, with the smallest one in case of Poland (to 3.2% from 3.5%), followed by Czechia (to 1.6% from 2.3%). Hungary and Romania saw their GDP forecasts for 2025 revised down by more than 1pp to 1.4% and 1.6% respectively. Apart from Poland, the previous forecasts came from October World Economic Outlook, which was released before D.Trump took office. Polish economy is expected to slow down a bit in 2026, although it will continue to grow at the fastest pace in the CEE. The remaining economies are about to accelerate next year. Inflation outlook has deteriorated as well due to the prospects of higher tariffs. IMF sees inflation above 4% in Hungary, Romania and Poland (4.9%, 4.6% and 4.3% respectively), followed by a decline in 2026 (yet with the average still above the inflation targets). In Czechia price growth should amount to 2.5% and equal the inflation target next year.

THE WEEK AHEAD:

• Next week looks quite interesting. The MNB will decide on interest rates on Tuesday, although we expect them to remain unchanged. The calendar also contains preliminary data on GDP growth in 1q25 from Czechia and Hungary (Wed.) as well as preliminary April inflation reading from Poland. May 1^st is a bank holiday in CEE-4, while the following day PMI indexes will be released.
• On May 4^th presidential elections will take place in Romania after elections held in November 2024 have been cancelled by the constitutional court. The winner of the cancelled round, C.Georgescu, has been barred from the presidential run. G.Simion, the leader of nationalist party AUR, has the highest support according to the polls, followed by C.Antonescu (candidate of the ruling coalition). E.Lasconi, who was a runner-up in cancelled November election can count on approx. only 6% of votes, after opposition party USR withdrew its support for her and backed a Bucharest Mayor N.Dan, who had higher chances of getting to the second round.

Drukuj