CEE Macro Weekly: Mixed signals on the finish line

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TOP MACRO THEME(S):

• 2024 ended on a low note in Poland (p. 3) – The data set for December brought some disappointment, yet we maintain our expectation of GDP growth acceleration in 4q24.

WHAT ELSE CAUGHT OUR EYE:

• POL: Into the uncharted territory – this is the title of our annual publication on Poland macro outlook summarizing ten most important economic themes for 2025. We highly recommend reading it.
• CZE: CNB Board member, J.Prochazka, expects a 25bp cut on the CNB’s next meeting in February. His view is supported by weaker than expected December CPI, however, January reading (its flash estimate will be published on the day of the meeting) will remain key to the decision. With current policy rate at 4%, interest rates in Czechia are gradually on the way towards more neutral stance – J.Prochazka sees the neutral rate somewhere between 3-4%, so the CNB may be in no rush with cuts at subsequent meetings.
• ROM: According to a poll by Avangarde, C.Georgescu could count on 38% support in the first round of presidential elections if it was to take place this weekend. The poll did not include Romanians leaving abroad in its sample, a group which massively favoured Georgescu in the first round of cancelled elections. Back then he gathered 23%. The first round of presidential elections will be held on 4^th May.
• POL: Fitch reported that all CEE countries, including Poland, utilized more or less all of their fiscal spaces from a country rating perspective, due to increased fiscal rigidity, i.e., increased fixed budget expenditures (on salaries, pensions, other social benefits and military spending) after the recent crises. It doesn't mean that Poland doesn't have enough fiscal space to react in case of another large and unexpected shock, but Polish debt, and its trajectory until 2028, will no longer be so favorable compared to the rating basket.
• HUN: B.Virag (MNB deputy governor) said that the inflation outlook for 2025 has deteriorated because of the weak forint and rising global oil and food prices – MNB in its December Inflation Report forecasted CPI inflation at 3.3-4.1% on average in 2025, against the range of 2.7-3.6% projected in September. B.Virag reiterated that the monetary policy should remain committed to fight inflation and should be careful not to declare a win over inflation too early. However, he did not provide a clear response on how monetary policy will react to the deterioration of the inflation outlook, pointing out that the real interest rate was still positive.

THE WEEK AHEAD:

• GDP figures for 4q24 will be in the spotlight next week. Starting with Hungary and Poland (full year growth estimate), in the former one GDP reading is expected to show a minor plus in y/y growth after hugely disappointing 3q24. In the latter, monthly data from 4q24 support our expectation of the acceleration of GDP growth in 4q24 (see text on p.2) and a full year result at 2.9%. Data will be accompanied by the corresponding publication from Czechia (Friday), where GDP growth shall not deviate much from dynamics in 3q24 (1.4% y/y). The MNB will decide on interest rates on Tuesday. We expect no change in monetary policy amid negative surprise in December CPI data, elevated services inflation and persistent concerns about the impact of fx developments on inflationary processes.

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