CEE Macro Weekly: Hungary at the crossroads

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TOP MACRO THEME(S):

• Hungary’s crucial vote (p.3) – Hungary heads into a pivotal parliamentary election this Sunday, with the real possibility of ending V.Orban’s 16-year rule and reshaping the country’s geopolitical orientation.

WHAT ELSE CAUGHT OUR EYE:

• POL: The NBP kept interest rates unchanged. The key policy rate remains at 3.75%. In a press release following the April meeting, it was noted that further MPC decisions will depend on the outlook for inflation and economic activity in Poland, which continue to be influenced by changes in commodity prices and global inflation, themselves dependent on the geopolitical situation. At the press conference after the meeting, the NBP Governor said that no changes in interest rates are expected in the near term, although everything depends on the situation in the Middle East. He added that a rate hike is not under consideration at this point. A.Glapinski stated that he is not concerned about the emergence of second-round effects, provided that the ceasefire between Iran and the United States proves durable. The NBP Governor also reported that in 2025, due to a negative result from exchange rate differences resulting from the appreciation of the zloty, the NBP recorded a loss of PLN 35.7bn. We still assume that in the coming months the MPC will remain in a wait-and-see mode and will refrain from decisions at least until a lasting end to the war in Iran.
• ROM: The NBR kept interest rates unchanged, including the policy rate at 6.50%, in line with expectations. The press release indicated that inflation in the March–June period will be higher than previously forecast, mainly due to an increase in fuel prices, resulting from higher oil and natural gas prices on global markets. It is expected that in 2h26 the NBR may resume interest rate cuts as inflation declines, inter alia due to base effects. However, a risk remains in the lack of fiscal space for any further mitigating measures in case of escalation of the conflict (current government measures include markup caps in the fuel trade value chain except for refineries, reduced excises for farmers and subsidies for transporters). This may imply a stronger impact of higher fuel prices on inflation than in other countries. For now, the NBR is adopting a “wait-and-see” strategy.
• CZE: Ministry of Finance downgraded its GDP growth forecast for 2026 to 2,1% from 2.4% citing the war in Iran as the primary reason behind the revision pointing to concerns about persistent second-round effects. The situation remains uncertain; however, given the current ceasefire, we maintain our more optimistic growth forecast of around 2.7%.

THE WEEK AHEAD:

• At the beginning of the week, we will see balance of payments data for Poland and Czechia. These will be readings for February, so they are not yet affected by the war in the Middle East which may boost imports due to an increase in commodity prices. The regional inflation data for March will be complemented by Tuesday’s release of inflation in Romania, which in our view may approach 10%, although it is unlikely to exceed that level. On the same day, we will also see the full inflation estimates for Poland and Czechia. Data on industrial production in Romania and Hungary, due on Wednesday, will also be worth watching.