Deteriorating economic sentiment in CEE

Erste Bank Research Team Erste Bank

On the radar

Hungarian central bank kept policy rate unchanged at 6.50%.
Hungary and Czechia publish flash estimate of 1Q25 GDP at 8.30 and 9 AM CET respectively.
Poland and Slovenia will release flash estimates of April’s inflation at 10 and 10.30 AM CET respectively.
Croatia will release retail sales and industrial output growth in March at 11 AM CET.
At noon CET Serbia publishes 1Q25 GDP release alongside retail and industrial output in March.

Economic developments

In April 2025, the Economic Sentiment Indicator (ESI) declined by 1.4 points in both the EU (to 94.4) and the euro area (to 93.6). In the EU, the decline of the ESI resulted from markedly lower confidence among consumers. In the region, similar trend was observed as the CEE average dropped to 97.4 in April from 99.1 in March 2025. The Economic Sentiment Indicators decreased in all CEE countries but Poland where it remained flat at 101 in April. The most extensive declines were observed in Czechia (-4.8 points) and in Slovakia (-2.8 points). In Hungary, Romania and Serbia decrease of ESI was more moderate – up to -2 points. Consumer confidence also weakened in majority of CEE countries in April. We associate worsening of the market sentiment and increase in uncertainty in April mostly with the announcement of global tariffs. We have already adjusted our growth forecasts down in a relevant way.

Market movements

In Hungary, the policy rate remained unchanged at 6.50%. Both the statement from the Monetary Council and the press conference by Governor Varga reiterated the usual themes of "cautiousness" and "patience." According to the Monetary Council, risks to the inflation have increased due to the varying timing and opposing effects of tariff announcements. Consequently, maintaining tight monetary conditions is deemed necessary, and the base rate may remain at its current level for an extended period. In Poland government reduced expectations regarding economic growth this year to 3.7% (down from 3.9%). We remain more cautious and see 2025 GDP growth close to 3%. The CEE currencies have slightly strengthened against the euro this week while long term yields are lower.

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Erste Bank Research Team

Erste Bank

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