Convergence process in CEE continues

On the radar

• Inflation rate in Poland remained flat at 4.9% y/y in March (flash estimate), while in Slovenia it increased to 2% y/y in March.

• Producer prices in Hungary increase by 8.2% y/y in February, while wages grew 10.4% y/y in January.

• Trade surplus in February reached EUR 1140 million in Hungary.

• In Croatia industry expanded by 5.4% y/y while in Serbia it declined by -1.8% y/y in February.

• Retail sales in Serbia also contracted in February by -0.5% y/y.

• Trade deficit in Serbia was at EUR -1038.2 million in February.

• Manufacturing PMI in Romania landed at while Czechia, Hungary and Poland will release it at 9 AM CET and 9.30 AM CET.

• Unemployment rate in Romania was reported at 5.6%.

• Later today, Croatia will publish flash estimate of March inflation.

Economic developments

In 2024, the GDP per capita expressed in Purchasing Power Standards (PPS) ranged between 66% of the EU average in Bulgaria and 241% in Luxembourg. The CEE region is well-positioned, with GDP per capita ranging between 77% of the EU average in Croatia and as much as 91% in Czechia and Slovenia. Most of the CEE countries have very similar GDP per capita percentages close to 80% of the EU average. The convergence process has proven to be quite strong. Two decades ago, when five CEE countries joined the EU, the discrepancy in GDP per capita was much more striking. In Romania, it was not even 40% of the EU average, while in Slovenia or Czechia, it was twice as high - above 80%. Romania and Poland have caught up to a great extent since 2004. The convergence process is set to naturally slow down; nevertheless, the CEE region manages to sustain a positive growth differential versus the Eurozone. This year, we expect the CEE region to expand by an average of 2.6%, as opposed to our growth forecast in the Eurozone at 1.0%.

Market movements

The 25% global tariffs on vehicles are set to come into force as of April 4th. However, on Wednesday, President Trump will announce reciprocal tariffs that will feature “country-based” tariffs. As far as local news is concerned, Polish inflation remained flat at 4.9% y/y in March (below the market consensus of 5.1% y/y), supporting the dovish central bankers who talk about monetary easing this year. The Hungarian Ministry of Finance lowered the GDP growth forecast for Hungary to 2.5% in 2025. In order to support the economy, the Minister of Finance announced further interventions. He proposed to freeze the costs that Hungarian banks charge their clients and spoke about “voluntary” price cuts by telecommunication companies. This comes shortly after unveiling new rules regarding institutional investors holding of government debt. Romania has presented the plan for bond supply in April and plans to sell RON 6.9 billion. On the FX market, the Polish zloty slightly weakened at the beginning of the week, while long-term yields moved slightly down.

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