CEE Macro Weekly: Subdued appetite for rate cuts

The full report is available here.

 

TOP MACRO THEME(S):

• Plenty of supply on real estate market – few buyers, many listings (p. 3) – Housing prices in Poland stabilized in 4q24, with weak demand, record-high unsold inventory, and a sharp drop in transactions. Prices are expected to remain stable in 2025, with a risk of moderate declines, in (an unlikely) scenario of the NBP not cutting interest rates by year-end.

 

WHAT ELSE CAUGHT OUR EYE:

• CEE: Central banks in both Czechia and Hungary decided to keep interest rates unchanged and presented a hawkish stance. The MNB revised its inflation projection upwards, while its governor declared that the policy rate will remain stable for a sustained period of time, we believe that at least until 2h25. According to the CNB the balance of risks remains inflationary, however, in our view, inflation outlook may give space to a cut on the next meeting in May (more details on p.2).
• POL: Moody’s agency confirmed Poland’s rating at A2 with stable outlook. The rating is underpinned by strong economic dynamics and improved relation with the EU. Moody’s expects Polish economy to grow by 4% this year, which is above our estimate (3.5%), and the fiscal deficit to decline from 6.1% of GDP in 2024 to 5.8% of GDP in 2025, while the debt burden should stabilize at around 60% of GDP by 2030. The agency highlighted that Poland’s elevated susceptibility to geopolitical risks is mitigated by NATO membership. Un upward revision to rating could take place subject to improved regional security situation and lower geopolitical risk. A downward pressure on rating would emerge in the opposite scenario, including concrete signals of the withdrawal of the US support.
• ROM: Fitch rating issued a statement in which it assessed that political uncertainty remains high in the run-up to rerun presidential elections in May. The agency stated that developments this year are consistent with views presented in December, when Fitch revised Romania’s outlook to negative. Fitch sees a risk to fiscal consolidation measures at least until 2h25 in delayed electoral cycle.
• HUN: Government revised upwards its 2025 inflation forecast to 4.5% y/y from 3.2% y/y, following a similar move by the MNB. This will affect the budget, since it will require higher indexation of pensions, though with a backward-looking effect and a payout in November.
• HUN: Registered unemployment rate increased slightly to 4.4% in February, from 4.3% in January. Despite some monthly uptick, it was still lower than a year ago (4.7%).

 

THE WEEK AHEAD:

• Next week will bring PMI indexes for the CEE (Tue.). It will be particularly interesting to see whether the increase in the Polish index above 50 points was a one-time spike or a beginning of a lasting trend. We’ll also get to know flash inflation readings for March coming from Poland (Mon.) and Czechia (Frid.). In the middle of the week the NBP will decide on the interest rates, however, due to relatively short time that passed since the last decision and accompanying projection, we do not expect a major change in stance, maybe unless March CPI reading brings some strong surprise. Some monthly indicators will also be worthy of attention including wage growth and industrial production (HUN), as well as retails sales (CZE).

Drukuj