CEE Macro Weekly: Romania’s road from austerity to innovation

Download report

TOP MACRO THEME(S):

• Strong forint and subdued inflation triggered a rate cut in Hungary (p.3) – The MNB cut rates by 25bp to 6.25%, citing favourable inflation trends and financial stability, it expects inflation to stay below the target in the near term before returning sustainably to 3% in 2h27. While stressing a data-driven approach and FX stability, MNB may deliver further easing in March.

WHAT ELSE CAUGHT OUR EYE:

• ROM: The Prime Minister I.Boloyan announced an administration reform bill that includes a range of measures aimed at restructuring the public sector. These include, among others, a reduction in staff (the number of occupied positions in local governments will be reduced by 10%, and including vacant positions, the reduction will reach 30%), as well as salary cuts in the public sector and stricter enforcement of local taxes. The education and healthcare sectors have been excluded from staff reductions, but they will be required to cut their expenditures. The retirement age for military personnel and police officers will be raised to 65. Local governments have until July 1 to implement these measures. The fiscal impact of these changes is estimated at approximately RON 1.6 bn in 2026 and RON 3 bn in 2027.
• ROM: In addition to administrative reform, the government approved an economic stimulus package. It is a multi-year package worth RON 5 bn, in force until 2032. Finance Minister A.Nazare stated that it is designed to shift the growth model from one driven by consumption to one based on innovation and investment. The package includes fiscal incentives, investment programs, and state aid for strategic sectors. Fiscal incentives include, among other measures, a 3% bonus for timely tax payments, an increase in the VAT cash accounting threshold to RON 5 mn in 2026 and RON 5.5 mn in 2027, and a 10% tax credit for R&D activities. Investment support will include, among other instruments, state aid through guarantees and state subsidies for investments between RON 7 mn and RON 50 mn; a state aid scheme for minimum investments of up to RON 75 mn in critical raw materials and clean technologies; and state aid for Romanians living abroad who are willing to start businesses in Romania (EUR 100 mn allocated for 2026–2029). The fiscal impact of this package has not yet been announced, however, the finance minister assured that costs will be covered by savings generated through the administrative reform.
• POL: Later today Fitch will make a decision regarding Poland’s credit rating; we do not expect any changes (A-, negative outlook).

THE WEEK AHEAD:

• The key event of the week will be the NBP meeting (Wed.), where we expect a resumption of the rate-cutting cycle, supported by updated NBP projection with stable low inflation and moderating wage growth. Such a scenario is also signalled by recent comments from MPC members. The week will begin with the release of February PMI readings for the region. On Wednesday, we will receive flash February inflation data from the Czechia (we expect stabilisation at 1.6% y/y). Revised 4q25 GDP estimates will also be closely watched, as they should help confirm the main drivers of (or drags on) growth.