CEE Macro Weekly: Not in love with inflation data

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TOP MACRO THEME(S):

• New year with higher inflation (p. 3) – CPI figures for January surprised on the upside across CEE, supporting the wait-and-see approach in monetary policy.

WHAT ELSE CAUGHT OUR EYE:

• POL: PM D.Tusk and FinMin A.Domański have presented an economic development plan. Investments in 2025 are expected to reach nearly PLN 700bn. The government is negotiating with Google and Microsoft regarding potential investments, while in the energy sector, financing has been secured for the first nuclear power plant, with plans underway for a second location. FinMin outlined a strategy based on 6 key pillars: 1) increasing funding for scientific research, 2) advancing the energy transition, 3) supporting modern technologies, 4) developing ports and railways, 5) implementing capital market reforms, and 6) pursuing deregulation.
• POL: GDP growth in 4q24 accelerated to 3.2% y/y from 2.7% y/y in 3q24. Statistics Poland slightly revised the sa data for several quarters starting from 3q22, as a result Polish economy did not contract by 0.1% q/q in 3q24, but expanded on the same scale. We estimate the carry-over effect at 1.1-1.2pp and still expect the Polish economy to grow by approx. 3.5% in 2025.
• ROM: President K.Iohannis announced his resignation one day before the scheduled parliamentary vote on his suspension, which had a high likelihood of success and could have led to a referendum. Senate President I.Bolojan will assume the role of interim president. The electoral calendar remains unchanged, with elections set to take place as planned on May 4.
• ROM: The NBR kept interest rates unchanged as expected. Decision was accompanied by new inflation projection according to which inflation will fluctuate markedly in 1h25, followed by a decline in 2h25, although on a higher path than previously forecasted and shall remain above the variation band of the target until the end of 2025. Output gap may widen moderately in 2025 and narrow gradually afterwards. We see this forecast as rather hawkish supporting no change to monetary policy parameters in the next meeting.
• HUN: European Parliament delegation will visit Hungary to assess the situation with regard to the rule of law. The fact-finding mission will focus on judicial reform and corruption. European Parliament has previously opposed the decision of the European Commission to approve the judicial independence reform of the government, which resulted in releasing the EU funds to Hungary.

THE WEEK AHEAD:

• Macroeconomic calendar will focus mostly on Poland. We will get to know monthly indicators on economic activity and the labour market in January. We expect both industrial production and construction output to decline y/y (by 1.8 and 1.1 respectively). January reading of employment will include an annual sample revision of enterprises employing >9 employees. We expect a reduction in employment at 0.4% y/y with a downside risk to this estimate. Wages should grow at single-digit again and stay like that throughout 2025. Our forecast for wages is clearly below consensus, as we take into consideration that minimum wage hike and public sector wages hikes in 2025 are way smaller than in 2024. Deeper than expected deceleration of wage growth could ease central bankers’ concerns about underlying inflationary pressures. This may be important for assessment of inflation and rates outlook. Thus, data on wages for January are worth much attention, more than usually.