CEE Macro Weekly: The consumer was calling the shots last year

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TOP MACRO THEME(S):

• Consumption dominated in 2025 (p.3) – GDP growth in the CEE region at the end of the year was driven primarily by consumption, much like over the year as a whole. The data were broadly in line with expectations, although the result for Hungary proved somewhat disappointing.

WHAT ELSE CAUGHT OUR EYE:

• HUN: The MNB, in line with expectations, left interest rates unchanged, including the base rate at 6.50%. Decision was unanimous. January meeting was the first since the MNB changed its forward guidance in December, opening the door to potential interest rate cuts in the future. In its press release, the MNB stated that the Council will make decisions on a meeting-by-meeting basis, with particular attention to the scale of New Year price list changes and financial market stability. At the same time, it emphasized that the MNB would remain cautious and stand ready to maintain a restrictive policy stance should conditions warrant it. During the press conference governor M.Varga emphasized that households’ inflation expectations remain elevated and are inconsistent with price stability. At the same time, he expressed the view that the strengthening of the forint, which has already passed through to producer prices, will soon also be reflected in CPI inflation.
• CZE: The government approved this year’s state budget deficit target, which amounts to CZK 310bn. It is CZK 24bn higher than the target approved by the previous government (CZK 286bn). According to finance minister A.Schillerova this difference accounts for public spending, including in transport infrastructure, which was not covered by previous budget bill. The Fiscal Council assessed that new state budget deficit target is breaching the fiscal responsibility law. The criticism mainly concerns the fact that the budget bill cannot be classified as a revision, given that the budget bill submitted by the previous government was rejected by the lower house. At the same time any further action was not specified by the Council.
• ROM: Ministry of finance announced that the budget gap narrowed to 7.65% of GDP in 2025 from 8.67% of GDP in 2024, confirming earlier media reports. The result was markedly lower than target of 8.4% of GDP. Fiscal consolidation measures boosted revenues by 15.3% y/y, including a 14.0% y/y increase in CIT receipts and a 10.7% y/y rise in VAT revenues. Expenditure rose by 11.2% y/y, with the slowest growth recorded in personnel spending (+1.9% y/y). Notably, this category posted a y/y decline in December for the first time in years. The end of the year also brought a marked acceleration in investment, including the use of NNRP grants (spending in this category increased by as much as 169%).

THE WEEK AHEAD:

• Next week, interest rate decisions will be taken by the NBP and the CNB. In the former case, we are leaning towards a rate cut as governor A.Glapinski pointed to such a possibility during his last press conference. In the latter case a hold is almost certain as inflation in services and housing remains sticky. The week will start with the release of PMI indices for the region. A particularly interesting release will be the flash estimate of consumer inflation in Czechia. According to our forecast, price growth may fall slightly below 2%. In addition, the calendar includes December data on retail sales in Czechia and Hungary, as well as industrial production in the latter.