CEE Macro Weekly: Election weekend

Download report

TOP MACRO THEME(S):

• Polish GDP surprised on the upside (p. 3) – GDP growth in 1q25 exceeded expectations, reaching 3.2% y/y, only slightly below the 3.4% y/y recorded in 4q24. Poland’s 1q25 GDP growth was the highest in the EU (excl. Ireland).

WHAT ELSE CAUGHT OUR EYE:

• CEE: On Sunday, second round of presidential elections will take place in Romania, while the first round will be held in Poland. We wrote more about the consequences of the first round and predictions for the final outcome in Romania in previous CEE Macro Weekly. Recent polls indicate that George Simion's lead is narrowing, despite him previously being considered the frontrunner in the election. Latest poll (conducted between 10-13 May) gives a 4-percentage point advantage to Bucharest Mayor, Nicusor Dan.
  Election polls in Poland have long indicated that the presidential election will not be decided in the first round either. Warsaw Mayor, R.Trzaskowski, who is also a deputy chairman of the ruling Civic Platform party, can count on the highest support. In the second round (on June 1st) he is most likely to face a formally citizen candidate, K.Nawrocki, who is supported by the opposition Law and Justice party. According to a poll by OGB-Polish Nationwide Research Group (conducted between 7-10 May) R.Trzaskowski will win the second round with 52,8% of votes. However, the final outcome is burdened by uncertainty related to the turnout in the second round.Trzaskowski is a supporter of further European integration and presents liberal views with regard to abortion law and LGBTQ+ rights. His potential victory should facilitate reforms of the ruling coalition, some of which have so far been blocked by the incumbent president, A.Duda (formerly Law and Justice), most recently a reduction of healthcare contributions paid by small entrepreneurs. On a social front, some of the unfulfilled campaign promises of the government include liberalizing abortion law and legalizing civil partnerships. More importantly, having R.Trzaskowski as president may pave the way to some judicial reforms to remove laws implemented by Law and Justice party, which have been questioned by the EU and hence blocked some of the European funds.
• CEE: Final estimate by Statistics Poland showed April inflation slightly higher than the initial estimate (4.3% y/y vs. 4.2% y/y initially), which is nevertheless a noticeable slowdown against 4.9% y/y in March. We estimate that core inflation decelerated to 3.4%, returning to the tolerance band of deviations for the first time since mid-2021. A similar return of the overall CPI inflation is expected in the summer, which together with an outlook of inflation remaining permanently within the tolerance band of deviations, will convince the MPC to another rate cut (in our base scenario it will happen in July). Inflation in Romania turned out close to expectations and stable against March, at 4.9% y/y. Inflation has been driven mainly by the food category. Czechia’s inflation has been confirmed at 1.8% y/y (more on p.2).
• POL: In its semi-annual review S&P confirmed Poland’s credit rating at A-, with a stable outlook.

THE WEEK AHEAD:

• At the beginning of the week results of the presidential election in Poland and Romania will remain in the spotlight. Macroeconomic calendar is dominated by Polish data including monthly economic activity indicators for April as well as business and consumer confidence for May.