2Q24 GDP growth surprised mostly to the downside

On the radar

• Inflation rate in Slovakia accelerated to 2.6% y/y in July.

• In Czechia, producer prices landed at 1.7% y/y in July

• Today, at 11 AM Croatia will release final footprint of July’s inflation.

• In the afternoon, Poland published core inflation for July.

Economic developments

In CEE, flash estimates of 2Q24 GDP growth surprised mostly to the downside across the region weighing on the full year outlooks. In Czechia surprise to the downside was rather marginal (0.4% y/y vs. expectations at 0.6% y/y) while in Hungary, Romania, Slovakia and Slovenia GDP growth fell short of expectations to a greater extent. Therefore, the revisions of 2024 growth will likely follow. Only Poland surprised to the upside as 2Q24 landed at 3.2% y/y (expectations at 2.7% y/y). We will put the 2024 forecast under revision as well. In Serbia growth remained solid above 4% and mostly in line with expectations. The GDP structure will be released at the end of August and beginning of September. Looking at monthly indicators, retail sector sustained solid performance as average growth of retail sales accelerated in 2Q24 in most of the countries. Industry on the contrary contracted and in many countries the decline of industrial output growth was more substantial in 2Q24 compared to the beginning of the year. Poland was one of the exceptions as industrial output growth accelerated to 2.2% y/y on average in 2Q24.

Market developments

Since the beginning of the week, the Czech koruna and the Polish zloty have strengthened against the euro, while the Hungarian forint on the contrary. EURHUF is at 395. On the bond market we have seen long term yields falling everywhere but Romania. On the bond market, Poland saw revival of demand for retail bonds that offer higher interest rates than banks for deposits. In Romania, we see week GDP growth in 2Q24 supporting dovish stance of the central bank. There are no other market related news.

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