CEE Macro Weekly: Economic harmony with one dissonance

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TOP MACRO THEME(S):

• Economic harmony with one dissonance (p.3) – The individual components of the Polish economy are forming an increasingly harmonious major chord, radiating optimism. One - albeit loud - dissonance is the fiscal situation, where the effects of geopolitical turmoil are most clearly visible.

WHAT ELSE CAUGHT OUR EYE:

• CZE: President P.Pavel appointed new government consisting of ANO, SPD and Motorists. The list of ministers is in line with earlier announcements, with the exception of the environment minister position which remains vacant. P.Pavel did not want to agree to the candidacy of F.Turek. New government has already approved the removal of the renewable energy surcharge, effective from the beginning of 2026. Industry minister K.Havlicek assessed that regulated component of electricity prices for businesses should fall by 20-30% (decline for households is estimated at 15.1%). Prime minister A.Babis announced that new budget bill will be passed on Jan 19. It is not clear whether the current fiscal framework will be kept.
• HUN: MNB kept interest rates unchanged as expected, with the base rate at 6.50%. Based on the new projections, the Council assessed that underlying inflation is expected to evolve more favourably over the coming year compared with the September projection, due to a stronger HUF and an improved external costs environment. The inflation target may be achieved on a sustained basis in 2027. Inflation projection was lowered for 2025 to 4.4% (from 4.6%) and for 2026 to 3.2% (from 3.8%), while it was revised upwards for 2027 to 3.3% (from 3.0%). The central bank expects slower economic growth over the entire projection horizon, compared with September. GDP growth in 2025 is expected to come in at 0.5% (vs. 0.6% previously), 2.4% in 2026 (vs. 2.8%) and 3.1% in 2027 (vs. 3.2%). The Council reiterated that maintaining tight monetary conditions is warranted. At the same time, trade policy and geopolitical tensions were removed from the list of risk factors for the policy outlook. It was added that future decisions will depend on price adjustments at the start of 2026 and on financial market stability. A data-dependent approach was also emphasised. We see the possibility of a rate cut no earlier than at the end of 1q26.
• CZE: The CNB left interest rates unchanged, with two-week repo at 3.50%. Press release noted that inflation will remain slightly above 2% until the end of next year. It also maintained the assessment that ongoing inflationary pressures from the domestic economy currently exclude a further reduction in interest rates. We believe that interest rates in Czechia will remain unchanged for an extended period.
• ROM: The ruling coalition agreed on an increase in minimum monthly gross wage by 6.8% (to RON 4,050) effective July 1, 2026. The agreement also assumes a reduction of sales tax on large companies from 1% to 0.5%.

THE WEEK AHEAD:

• In the final stretch ahead of the Christmas, some interesting data from Poland will be released on Monday. Retail sales figures for November should show that consumer spending might have slowed down to 3.5% y/y from 5.4% y/y in October due to less favourable calendar (fewer Saturdays). Business sentiment indicator for December will be a hint on condition of the key sectors of the Polish economy at the end of 2025. One should not miss monetary statistics for November.