CEE Macro Weekly: Hawkish moods

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TOP MACRO THEME(S):

• Awaiting better conditions for rate cuts (p. 3) – The CNB made a hawkish cut, while the NBP remains in the hawkish ‘higher for longer’ mode.

WHAT ELSE CAUGHT OUR EYE:

• CEE: PMI indices for manufacturing in January signaled that economic activity in this sector has remained subdued, as readings in the CEE remained below the 50-point threshold. Czech index rose to 46.6pts, exceeding expectations due to a milder decline in production and orders, although export demand remains weak. Hungarian PMI fell to 49.8pts, dropping below 50 for the first time since October, indicating a deterioration in sentiment. The index for Romania declined to 46.1pts, marking the sharpest contraction in production and employment to date (although time series is relatively short). Poland’s PMI increased to 48.8pts, suggesting potential stabilization and an improvement in outlook, although demand remains weak and exports continue to be under pressure. Uncertainty surrounding U.S. trade policy weighs on export prospects.
• CZE: CEZ (the largest energy supplier) has lowered its fixed electricity price offers for households starting in February. The new 2-year tariff will be 2,590 CZK/MWh (excluding VAT), representing a decrease of 8.1–14.4% compared to previous offers. The reduction will apply to customers after their current contracts expire. The estimated impact on CPI inflation is rather limited as it ranges from -0.06pp to -0.22pp y/y, with the effect spread over time. This move may encourage other suppliers to introduce similar reductions. Further declines in energy prices may help contain inflationary pressures in 1h25.
• CZE: IMF has completed Article IV consultations, forecasting GDP growth of 2.4% in 2025 (up from 2.3%). Growth risks are on the downside, mainly due to a weaker recovery in Germany. The IMF is optimistic about inflation, expecting it to decline to the 2% target, and suggests further monetary easing. It recommends a neutral fiscal stance in 2025 but calls for greater consolidation in the medium term. Structural issues, such as a tight labour market and high social spending, were also highlighted.
• ROM: As expected, the parliament approved budget bill with target deficit at 7.0% and economic growth of 2.5%. Romania’s Fiscal Council sees the deficit at 7.7%, stating that revenues are overestimated based on the (hypothetical) improved tax collection, while costs are underestimated with regard to administrative spending.

THE WEEK AHEAD:

• Next week looks very interesting. It will start with prime minister D.Tusk presenting economic development plan for Poland. Meanwhile macro calendar includes January inflation data for Hungary (Tues.), Romania and Poland (both on Friday), as well as a full estimate for Czechia (Wed.) Data may be of particular importance for the NBR, that will have its decision-making meeting on Friday, although we expect no change in interest rates. Monthly economic indicators for December will also continue to arrive (incl. industrial production in Romania and Hungary), however, they will be of secondary importance, amid estimates of GDP in 4q24 for Poland and Romania.